+ Gross margins keep rising. A higher mix of fresh food drove margins higher, again. SSG’s strength is in meat and seafood. There is a higher level of complexity in handling these items than fruits and vegetables due to their higher value and level of freshness and perishability.
+ Guiding three to five new stores per annum. In 2021, SSG added only 1 new store. The company is guiding 3 to 5 new stores per year over the next three to five years in HDB housing estates. There are another 17 locations planned to be opened in such estates over the next three years.
+ Same-store sales accelerated. Same-store sales accelerated in 1Q22 to 4.7% YoY. This is faster than 2H22 3.6% YoY. Pre-pandemic, same-store sales grew at 0.1% in 2019 and a negative 1% in 2018.
Borders reopening, lifting of dining restrictions and the return to office will result in less dining at home and grocery shopping. Alternatively, higher grocery prices could lead to consumers shifting more to value grocers or home dining. The secular trend of taking market share from wet markets remains intact. The three new stores will contribute to growth this year as they add another 24.5k sft of space or a 4% increase in total footprint.
Maintain BUY with unchanged TP of S$1.75
SSG’s attractive financial metrics include ROEs of 27%, dividend yields at 3.6% and net cash at S$254mn (as at Mar2022).