Sheng Siong

Sheng Siong: (S$0.885) Growth story intact with more stores to be secured
Maybank-Kim Eng is maintaining its bullish call on Sheng Siong in light of expectations of further expansion as well as its defensive nature.

The supermarket group recently announced 3Q15 net profit of $14.5m (+18.7% y/y), meeting the street’s estimates on revenue growth of 7.3% to $200m as five new stores contributed to the group’s overall performance.

Post-earnings, Sheng Siong's growth story continues to have its roots in the opening of new stores with management particularly optimistic about securing more store space from HDB.

HDB is expected to complete about 30 HDB commercial sites by 2016 to support retailers. However to-date, only eight such sites have been completed, suggesting more offerings will be made available in 2016.

So far, the group has confirmed the opening of two stores at Tampines 506 and Junction 9 in 2016, which would add an additional 34,180 sf to its portfolio (3Q15: 426,000 sf).

On the China front however, Sheng Siong's Kunming venture has been unable to source for a suitable location for its first supermarket.

Another key downside remains the lacklustre growth at its old stores, which are projected to grow at a slower 1-3% because of weaker retail sentiment.

The group is taking steps to counteract this trend by renovating stores located in old HDB estates to boost sales with at least one large store to be renovated in 2016.

In view of the above, the house maintains its Buy call on the counter with a TP of $1.07, implying a potential upside of 21% from current prices.