Sheng Siong 2Q17 Earning Updates July 31, 2017

Consumer staples companies have always form a resilient part of one’s portfolio. Today, I will be giving an update on Sheng Siong latest earnings and insights which investors should be aware of when you are investing into this company.

Based on the earnings reported last Thursday, Sheng Siong has:

1) Grown its 3Q Revenue by 6.8% YOY
2) Improved its Gross Profit Margin by 50 basis points
3) Grown its 3Q Net Profit by 6.1% YOY
4) Retail Area contracted by 1.8%, due to closing of “The Verge Mall”
5) Lower dividend to 1.55 cents, compared to 1.9 cents a year ago.

With no earnings surprises, what could potentially be the factors affecting the shares during a period when STI has climbed to its year high? While there is no certainty what attributed to the drop the last few days, investors should be aware of 2 key events.

1) Intensified competition by E-Commerce companies.

By now you should have heard of “Amazon Prime”, which has launched as an e-shopping platform in Singapore. This new service allows consumers to make purchase via the App (downloadable from iTunes or Play Store) and it is possible for the items be delivered to you on the same day. While they are not the first, as others like Honestbee or Redmart provide such services as well. Having a new entrant to the sector, we might see discount tactics among players to preserve or grow market share. Such competition may erode Sheng Siong gross profit margins and/or market share.

2) Contraction of local retail spaces

Sheng Siong 2Q17 Earning UpdatesSource: Q2 2017 Result Presentation (

With the closure of a big retail space in The Verge Mall and Woodlands, Sheng Siong is likely to see a contraction in revenue going forward. Part of Sheng Siong success over the past few years lie in its ability to consistently expand its network of outlets to contribute to the overall top-line growth. They have not been successful in securing new areas in 1H 2017. However, we do see two new local stores (Woodlands and Bukit Panjang) and their China (Kunming) store opening at a later part of this year.

Good or Bad?

While the above are concerning, investors who are vested or looking to invest should always form their own opinion when evaluating investment opportunities. In my personal opinion, I would like to share the following 3 points with investors who are digesting Sheng Siong’s second quarter report.

1) The landscape in Singapore is slightly different compared to other countries such as the US. Most of the time, residents do have supermarkets within close proximity, and such convenience may deter the usage of e-commerce.

2) Inability to tender for new stalls may hinder their topline growth. However, others can argue that this is a wise choice if the tender price does not make economic sense. For the second half of this year, there is still a healthy pipeline of supermarket spaces up for bidding.

3) Sheng Siong interim dividend fell 18.4% and such decline has both good and bad consequences. To an investor, you may have a lower return on investment or dividends for the short term but earnings could be reinvested for the expansion of the company. Such funds can be used to acquire more stores to achieve top line growth that can eventually lead to higher profit and higher dividends in future.


While the intrinsic value of Sheng Siong is anybody’s guess, investors planning to take a stake in this company should be comfortable with the management ability and the future landscape of supermarket business.

If you wish to know more information about stocks, you can speak to your designated Trading Representatives or a Dealer at a Phillip Investor Centre near you.


These commentaries are intended for general circulation. It does not have regard to the specific investment objectives, financial situation and particular needs of any person who may receive this document. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of the units and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. Investors may wish to seek advice from a financial adviser before investing. In the event that investors choose not to seek advice from a financial adviser, they should consider whether the investment is suitable for them.

The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries.

Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned.

About the author

Mr Michael Tay
Equity Dealer

Mr. Michael Tay currently provides dealing services to over 17,000 trading accounts and is part of the POEMS Dealing, the core in-house dealing department of Phillip Securities Pte Ltd.

Michael is a strong believer of value investing, focusing on companies with strong fundamentals and good dividend policy. Apart from his dealing role, he often provides training seminars on Fundamental Analysis topics to further enrich his clients’ financial knowledge.

Michael holds a Bachelor Degree of Finance from the SIM University (UniSIM) and was awarded the CFA Singapore Silver Award in 2012.

Contact us to Open an Account

Need Assistance? Share your Details and we’ll get back to you