Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on changes – just in case they’re material to our investing thesis. With 19 of its 30 constituents clocking gains, the Straits Times Index (SGX: ^STI) has managed to inch up by 0.4% to 3,328 points today. Let’s take a closer look at two market beaters. Supermarket retailer Sheng Siong Group Ltd (SGX: OV8) is up 1.4% to S$0.705. Last week, the company announced a joint-venture with China-based condiment maker Kunming Luchen Group Co. Ltd. The aim of…
Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on changes – just in case they’re material to our investing thesis.
With 19 of its 30 constituents clocking gains, the Straits Times Index (SGX: ^STI) has managed to inch up by 0.4% to 3,328 points today.
Let’s take a closer look at two market beaters.
Supermarket retailer Sheng Siong Group Ltd (SGX: OV8) is up 1.4% to S$0.705. Last week, the company announced a joint-venture with China-based condiment maker Kunming Luchen Group Co. Ltd. The aim of the joint-venture would be to operate supermarkets in China.
The venture would likely start on a small scale, given that it would only have start-up capital of US$10 million. Sheng Siong owns 60% of the joint-venture, followed by Kunming Luchen with 30%, and Tan Ling San with 10%. Incidentally, Tan happens to be Sheng Siong’s Executive Director.
The potential for growth that this joint-venture holds is huge given the size of China’s domestic economy. In addition, it can provide a great avenue for overseas expansion for Sheng Siong. But, investors have to note that the path to success is likely filled with challenges and danger. I’d let my colleague Stanley Lim fill you in on the details of such a view:
“Many large foreign retail players have tried entering the Chinese market and have struggled to make a big impact or have basically failed. US-based Walmart’s an example of the former while Tesco from the UK is a good fit for the latter; both companies are in the same kind of industry as Sheng Siong and both have a lot more resources to play with. For instance, Walmart and Tesco clocked around S$600 billion and S$120 billion in annual sales respectively in 2013.
With Sheng Siong now so late to the game, competition might be even greater now in China.
In addition, as fast as China has been growing, there are also some signs of a slowdown in its Gross Domestic Product growth. Add on a crackdown on corruption by the Chinese government, and what China ends up with is a retail industry that’s not in the best of health. For instance, China’s largest hypermarket operator Sun Art Retail Group is facing much slower growth going forward.”
Civmec Ltd (SGX: P9D) is next in line with its shares gaining 1.3% to S$0.77. The Australian company, which provides engineering and construction services to the oil and gas and infrastructure sectors, had announced its full-year earnings last Wednesday.
For the 12 months ended 30 June 2014, Civmec’s revenue grew by 7% to S$433.7 million while its profit dipped slightly by 2.7% to S$35 million. The company named unfavourable currency swings (the Australian dollar had weakened against the Singapore dollar) as the main culprit for its profit decline.
In the earnings release, Civmec also reiterated a change in its business strategy:
“On 29 July 2014, Civmec outlined strategies to position itself as a preferred heavy engineering solutions provider by building upon its suite of cross-disciplinary capabilities, driving greater internal efficiencies by enhancing systems and processes, as well as exploring geographical expansion within and beyond Australia.”
Civmec also mentioned that despite a shift in Australia’s resources sector toward an operating expenditure model, there are still “substantive” capital expenditure investments being made in the country. The company intends to improve its capabilities in order to meet the demand for maintenance services that come with new capital expenditures.
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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 writer Chong Ser Jing doesn’t own shares in any companies mentioned.