The Positives
+ Revenue resilience. Revenue growth was entirely powered by new stores opened for a year. 1Q21 annualised revenue per sq ft remained a lofty S$2,363 vs. pre-pandemic’s S$1,916 in 2019. Gross margins at 27.6% were above historical levels of 26.8%, thanks to lower input prices and a higher sales mix of fresh goods.
+ Healthy cash and strengthening balance sheet. Operating cash flow generated in 1Q21 was S$28.8mn. Net cash is now S$241mn (4Q20: S$224mn).
The Negative
– No store openings. There were no new store openings in the past six months. SSG was not successful in two tenders in November. HDB has temporarily paused on tenders except for a large store SSG is looking to bid in the current quarter which could potentially be rolled out in 3Q21.
Outlook
1Q21 revenue per sq ft remained elevated at S$2,363 on an annualised basis (FY20: S$2,423). A reason was the continued closure of international borders, which kept more households in the country. Working from home was another contributor. As borders re-open, growth in FY22e should stem from accelerated store expansion from the recent pause in HDB tenders.
Maintain ACCUMULATE with unchanged TP of S$1.71
SSG’s investment merits remain its impressive 26% ROEs, dividend yields of 3.2% and net cash of S$224mn. Stock catalysts are expected from new store openings.
Paul has 20 years of experience as a fund manager and sell-side analyst. During his time as fund manager, he has managed multiple funds and mandates including capital guaranteed, dividend income, renewable energy, single country and regionally focused funds.
He graduated from Monash University and had completed both his Chartered Financial Analyst and Australian CPA programme.