Sheng Siong Shines Bright in FY2023: Cash-rich, Debt-free and Expanding

March 13, 2024

One of Singapore’s top retailers Sheng Siong Group Ltd (SGX:OV8) is stacking up the wins in the grocery game. FY2023 was a checkout bonanza for them as they reported higher profits and increased dividends.  

Besides that, their latest earnings report also revealed that the company is sitting on a hefty cash pile with zero debt, juicier gross margins and an outlook as fresh as their produce section.  

Let’s unpack why Sheng Siong, one of the cheapest supermarkets on the island, should have investors adding the company’s stock to their investment carts.   

Closing the Year with a Flourish

Imagine ending the year with more money in your bank account than you started with, despite splurging on concert tickets. That’s Sheng Siong in 2023. Their revenue — think of it as their total income from selling groceries and household items — went up by 2.1% to S$1.37 billion. How? They opened six new stores, attracting more customers. Their net profit, or the money they kept after paying all their bills, slightly increased by 0.3% to S$134 million. Plus, they’re sitting on a cash pile of S$324.4 million with zero debt. That’s a comfortable cushion given the high interest rate environment.  

Saving More, Earning More

Every year, Sheng Siong gets better at saving money on the goods they sell, which boosts their gross margin — the difference between the cost of goods sold and the sales revenue. Think of it as buying your festival outfits at a discount but still feeling like a million bucks. They’ve pushed their gross margin up to 30% in 2023 by buying in bulk and managing their supply chain efficiently. Their secret sauce? Over 1,600 products under 23 house brands that keep customers coming back for more.

Expansion Is the Name of the Game

From a cozy 33 stores to a whopping 69 in a decade’s time, Sheng Siong’s expansion game is strong. They’ve managed to more than double their store count, meaning more neighborhoods now have a Sheng Siong store to call their own. The plan is to keep this growth spurt going, with new stores popping up, aiming for at least three new openings a year. More stores mean more sales, which is excellent news for their bottom line.

Bright Days Ahead

Inflation and economic uncertainties usually mean a tighter budget for most people. Sheng Siong anticipates this could drive more customers their way, looking to stretch their dollars further by cooking at home and hunting for bargains. Plus, with government payouts and vouchers in the mix, Sheng Siong is poised to benefit as more people turn to value-based shopping.

Rewarding Shareholders

Reflecting their solid performance, Sheng Siong upped their dividend to S$0.032 per share, higher than the S$0.0307 last year. For shareholders, this is like getting a bonus payout for investing in the company. Despite a slight dip in their share price, the company’s steady growth and strategic expansions signal promising prospects. 

Wrapping Up 

With so much uncertainty in the market, Sheng Siong stands for its stability and growth opportunities. Whether you’re a budding investor or just curious about how big companies make money, Sheng Siong’s journey through 2023 is a testament to the power of smart planning and execution. Keep an eye on them; there’s much to learn from their playbook.  

Disclaimer: ProsperUs Head of Content & Investment Lead Billy Toh doesn’t own shares of the company mentioned.

Billy Toh

Billy is deeply committed to making investment accessible and understandable to everyone, a principle that drives his engagement with the capital markets and his long-term investment strategies. He is currently the Head of Content & Investment Lead for Prosperus and a SGX Academy Trainer. His extensive experience spans roles as an economist at RHB Investment Bank, focusing on the Thailand and Philippines markets, and as a financial journalist at The Edge Malaysia. Additionally, his background includes valuable time spent in an asset management firm. Outside of finance, Billy enjoys meaningful conversations over coffee, keeps fit as a fitness enthusiast, and has a keen interest in technology.

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