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Singapore’s Cheapest Retailers

shoppingIt is sometimes said that the people of Singapore have two main pastimes – eating and shopping. You only have to wander briefly through the many shopping malls that pepper the Garden City to appreciate just how true that might be. In fact some retailers even help their customers combine the two hobbies into one by offering food inside their shops.

Thing is, retailing is a huge component of Singapore’s economy. It accounts for around a-sixth of the country’s economic output. Consequently, it is not surprising to see a plethora of retailers listed on the Singapore stock market. They range from the ubiquitous IT retailer Challenger Technologies to supermarket behemoth Dairy Farm International Holdings (SGX: D01), which operates under the banners of Cold Storage, Giant and Jason’s.

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Often when looking at retailers, the price-to-sales ratio can be a convenient starting point to compare relative cheapness. It can help reduce businesses with vastly different market values and revenues to a single number.

Generally, the lower the ratio, the more attractive the investment might be. In Singapore, the average price-to-sales ratio for retailers is around 1.4. So, retailers with a ratio below this might be worth investigating further because the market may be undervaluing every dollar of sales that those companies make.

Company Price-to-sales
FJ Benjamin (SGX: F10) 0.38
Popular Holdings (SGX: P29) 0.42
Challenger   Technologies (SGX: 573) 0.52
Isetan Singapore (SGX: I15) 0.56

Source: Capital IQ

FJ Benjamin operates 191 stores worldwide of which 28 are in Singapore. The company imports, exports, licenses, distributes, sells fashion wear and accessories from its Singapore headquarters. The upmarket brands under its umbrella include Celine, Givenchy and La Senza.

There aren’t many people in Singapore who haven’t heard of Popular – it’s been around for decades. The first Popular bookstore opened in 1936 in North Bridge Road, and today there are around 148 outlets in Singapore, Malaysia and Hong Kong. Popular Holdings is not just a book store any more but a publisher too. It has even dipped its toes into the property market and hopes to use the returns to finance its books business.

Challenger has one megastore, 19 superstores and 9 mini-stores in Singapore. But that’s not all it has. It also operates 3 stores in Malaysia. Five years ago, the company reported sales of S$136m but by 2012 revenues had jumped to S$337m. What’s more profits have more than doubled from S$7m to S$16m. Earlier this year, the gadget seller said it expects to open two more outlets in Singapore.

Isetan has been in Singapore for so long that it is easy to forget that it is actually a subsidiary of Japan’s Isetan Mitsukoshi. The company operates five department stores in the city though there is little in the way of sales growth. Since 2007 revenues have been virtually flat at around S$350m, which might explain the unchanged dividend payout of 8 cents per share, which equates to a yield of 1.5%.

The price-to-sales ratio can be a useful starting point to help identify potentially lucrative investments. However, it should not be used in isolation but in conjunction with fundamental analyses. After all, there might be some very good reasons why the market may not appreciate every dollar of sales the shopkeeper is ringing up at the till.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.