Sheng Siong Group Ltd (SGX: OV8), one of the leading supermarket chains in Singapore, specialising in the retailing of quality and affordable groceries and fresh produce, reported a robust financial performance for the Q1 2024. The performance was also slightly ahead of expectations. Here are the five key highlights for investors.
1. Strong Earnings Performance: Sheng Siong reported a Q1 net profit of S$36 million, marking a 9% year-over-year (yoy) increase. This performance was slightly above market expectations, signaling robust operational efficiency.
2. Extended Sales Boost: The timing of the Lunar New Year provided an extended sales period, contributing significantly to a 6% yoy revenue increase. This demonstrates Sheng Siong’s ability to capitalise on seasonal opportunities.
3. Strategic Expansion Plans: Sheng Siong is actively expanding its footprint with plans to open four new stores in Singapore and one in China during FY2024. This expansion is supported by a strong balance sheet with a net cash position of S$352 million as of March 2024.
4. Operational Efficiency: Despite rising business costs, including increased staff costs and utility expenses, Sheng Siong improved its operating profit margin by optimizing its sales mix and operational practices.
5. Market Positioning and Growth Potential: The supermarket operator’s strategic initiatives, including securing new locations and potential acquisitions, position it well for sustained growth in a competitive market environment.
Sustained long-term growth opportunities
Given the solid financial performance and strategic growth initiatives detailed in the Q1 2024 report, Sheng Siong presents a compelling investment opportunity. The expansion into new markets and ongoing improvements in operational efficiencies are likely to sustain long-term earnings growth, making Sheng Siong a worthy addition to investment portfolios focused on retail and consumer goods sectors.
Our analysts have set a target price of S$1.88 for Sheng Siong, suggesting a significant upside potential of 22.1%. Investors however should weigh the potential benefits against some of the risks, which include weaker sales and potential margin erosion amid heightened industry competition. As with any investment, a balanced approach considering both potential returns and inherent risks is advisable.
Disclaimer: ProsperUs Head of Content & Investment Lead Billy Toh doesn’t own shares of the company mentioned.
