Sheng Siong Group Ltd – Same-store sales inching up October 30, 2023 279

PSR Recommendation: BUY Status: Maintained
Last Close Price: 1.5 Target Price: 1.80
  • 3Q23 results were within expectations. 9M23 revenue and PATMI were 75%/74% of our FY23e forecast. Despite, the spike in salaries and electricity cost, PATMI grew 6% YoY on improving gross margins and interest income.
  • Same-store sales in 3Q23 grew 1.8% YoY, inching up from 2Q23 by 1.5%. We believe the improvement is from market share gains. Visible promotions in the community and a reputation as a cost leader helped push revenue growth.
  • We expect higher earnings growth in FY24e from new stores, lower utility costs, increase in same-store sales and interest income. Our FY23e earnings and BUY recommendation is maintained. However, we are lowering our target price to S$1.80 (prev. S$1.98). Historical valuations have been creeping downward from 22x PE to 20x PE. Post- pandemic there has been a de-rating of growth expectations.




The Positives

+ Same-store sales building momentum. We have seen same-store sales turning since 2Q23. Momentum has crept up to 1.8% YoY in 3Q23, from an estimated 1.5% YoY in 2Q23. Same-store sales is rising from market share gains and a jump in population in Singapore.


+New stores recovering. SSG added one new store in Yishun. There are three more stores pending award by HDB. Thereafter, there are another 5 stores in the pipeline by HDB over the next six months.


The Negative

– Operating expenses jumped S$6.1mn YoY. The introduction of a progressive wage model and higher utility costs drove up operating expenses by S$6.1mn (or 10% YoY). Despite higher wages, the number of staff at 3200 is similar to pre-pandemic levels. Utility cost is expected to decline in FY24e.

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About the author

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Paul Chew
Head of Research
Phillip Securities Research Pte Ltd

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.

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