Sheng Siong caught my attention recently as it has had good growth, and has not really rallied. SBS Transit has always been on my radar, but its rally has been too sharp to follow.

Not the case of Sheng Siong, where it still has multiple analyst calls to buy. It gives a good current dividend yield of 3.12%. Dividends has largely held up in the past 5 years too.

See these Target Prices:

Each easily gives a 10% capital gain.

Why not lets check out Sheng Siong together?

1. Revenue & Net income has been rising consistently for past 6 years

Revenue ($m)
2013 - 687.4
2014 - 726.0
2015 - 764.4
2016 - 796.7
2017 - 829.8
2018 - 890.3 (unaudited)

Net income ($m)
2013 - 38.9
2014 - 47.6
2015 - 56.8
2016 - 62.7
2017 - 69.5
2018 - 70.5 (unaudited)

2. Financial analysis

Sharp rise in Rental Expenses of $4.4m in FY 2018 as compared to FY 2017. Staff costs rose 6.7m in the same period too.

Cause of this was due to the opening of 3 new stores.

Government Grants has fallen sharply from $4.4m in FY 2017 to $1.6m in FY 2018. This is a one-off event and has no long term impact to the bottomline.

Healthy Cash Balance of $87m

You can see below table which presents financial ratios most important to Value investors!

Given the recent run-up, P/E ratio seems to be lower than Dairy Farm too. It has a healthier Price to Book ratio too.

P/B ratio is a little high compared to Average. Its comparable to ST Engineering's 5.13, however, still well below Dairy Farm's 6.20. See this table for Average Price to book ratios, where Consumer Staples gives an Average Price to book ratio of 4.59:

Debt-Equity ratio is extremely healthy, as we can see that Sheng Siong has no borrowings. Its funds come mainly from equity, and default risk is quite low.
(**Interestingly, NTUC Fairprice has an extremely low Debt Equity Ratio too!)

However, having a PEG ratio of 15.09 shows that you could be over-paying for its promised growth.

Enterprise value is on the high side at 15.34. We can see that Singtel's EV is around 9.35 after its recent decline.

Price to Sales ratio is reasonable, given that it has been growing well, and making good profits for past 5 years. Singtel's Price to Sales ratio is about 2.73, much higher compared to Sheng Siong.

3. Business analysis

I believe we are all familiar with Sheng siong's business. It operates mainly in the Supermarket sector, and main competitors include Giant and NTUC.

It does not compete in the Hypermarket area, but instead, focuses on serving the people at neighborhood areas.

After its Kunming store opens in 2Q2019, Sheng Siong Group’s total store count will be 56, 54 Locally and 2 in China.

In 2018, Sheng Siong also opened a multiple new stores.

Source: Latest Financial Report 2018 Dec

Not just me, other people love this company too! See this Married deal that happened around May 2018.

As Sheng Siong is highly dependent on the HDB development in Singapore. The trend of HDB building less and less flats every year is a bad trend for Sheng Siong.

However, HDB does have future plans to develop new towns in this land scarce Singapore. Sheng Siong can look to grab opportunities at the new Tengah new town, or Paya Lebar new town (Paya Lebar Air Space) in the distant future.

China is still a risk to Sheng Siong. It has affected the bottomline of Sheng Siong, however, not yet materially. It was reported that Sheng Siong has previously limited loss of China ventures to S$6m.

Given that they are going ahead to open a second store, this could present as an opportunity as they fight to promote the Sheng Siong Brand in China.

Sheng Siong operates in China via a Joint venture, where it owns 60% of the JV, Kunming Lǜchén Group owns 30% and SGX listed Xpress Holdings owns 10% (now known as A-Smart).


I will still wish to invest in Sheng Siong. If the price could dip a little to  $1.03-1.06, I would price in $3,000 as an addition to Llama Unit Trust Portfolio.
**Current price: $1.09

I am confident that Sheng Siong will not be adversely affected by rising interest rate climate, as it has an extremely low Debt to Equity Ratio. It does not have any substantial borrowings too.

Being in the consumer staples sector, it is a defensive play.

It is a well-known Singapore brand, with focus on wet/dry supermarket sector. I believe it carries less concentration risk as compared to Dairy Farm, as we can see Giant stores closing and shrinking its footprint. Read here

We should also consider how Sheng Siong can compete in this Technological Era, where RedMart, HonestBee are coming up with their own supply chains that allow customers to get groceries within a few clicks.

Being Singaporeans, we all know Sheng Siong's strength lies in being able to offer cheap and fresh groceries. From this article, it seems Sheng Siong is able to leverage on its Brand for budget conscious customers (its main target customers).

It has financial tie-ups with Bank of China to offer Credit card rebates too.

All in all, Sheng Siong is still generally well-managed, with strategic store locations all around Singapore. As long it maintains its own brand well, I do not see any reason its business cannot sustain well.

Its all for you -

Image result for sheng siong store


  1. It's a well managed company with a decent dividend. It's one to hold for the long term.

    1. Yes, definitely holding it for long-term :)

      Are you holding it?

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  3. Hey, Mr Llama! Here are some of my notes, not sure if it will be helpful!

    Comparing against its regional peers, Sheng Siong has the best inventory turnover days! This means that Sheng Siong is more capable at moving inventories.

    • Managed to hire Tan Ling San, a supermarket veteran, to optimise store space. Tan Ling San was running Econ Minimart previously.

    • This resulted in Sheng Siong has the best revenue per sq feet (wow!) among supermarkets in Singapore, comparing against Dairy Farm (Giant and Cold Storage) and NTUC.

    • Not only that, it focuses on the heartland because the rentals are cheaper. Because of this saving, it allowed Sheng Siong to pass down the savings down to customers in terms of lower product prices and it creates loyalty among its regular customers.

    • It also focuses on fresh produce and their own house brands (Happy Family, Powerplus, Royal Golden Grain, Softess) to deliver higher gross margins as well.

    • This loyalty among customers allows Sheng Siong to grow its brand very well and allowed it to expand its warehouse. With a bigger warehouse, they are able to buy in bulk and enjoyed higher discounts on purchases. It increased
    their margins further. It is a virtuous cycle.
    • Through technology, Sheng Siong’s store were optimised using self-check-out
    kiosks to reduce waiting time. Also, the company uses RFID in their
    warehouse and designed their own warehouse enterprise system to fasten inventory replenishment.

    • Finally, the founding shareholders created a family-oriented culture where everyone work hard and everyone get to share the fruits of their labour. A portion of the company’s earnings are shared among all the employees. This has helped promote strong loyalty among its employees.

  4. Thanks for adding on to this Kelvestor!

    At time of writing, it was at $1 range. Now it has gone up to $1.20. Well, if it is a growth stock, risk is technically not that high. But, it is best to wait for the market to be shaken abit first?

    Particularly, yes, the automation is the thing that boosted mcd's stock price over the years too!

    Analysing the culture is something new to me.. i bet you have your network that allow you to understand the culture? Haha

    ReplyDelete, pub-6541438499854011, DIRECT, f08c47fec0942fa0