Sheng Siong Group Ltd’s Latest Earnings: What Investors Should Know

Sheng Siong Group Ltd  (SGX: OV8) reported its fiscal third-quarter earnings yesterday evening. The reporting period was for 1 July 2015 to 30 September 2015.

Sheng Siong is one of the larger supermarket chains in Singapore with its network of 38 stores primarily located in the heartlands here. You can learn more about the company in here.

Financial highlights

The following’s a quick summary of Sheng Siong’s latest financial figures:

  1. For the reporting quarter, revenue grew by 7.3% year-on-year, coming in at around $200 million.
  2. Profit for the period did even better, jumping by 18.7% from a year ago to $14.5 million in the reporting quarter. It must be noted though that the quarter’s profit had benefitted from a one-off advertising support from Sheng Siong’s partners and suppliers for a special event.
  3. Subsequently, earnings per share (EPS) rose 11.2% from 0.86 cents in the third-quarter a year ago to 0.96 cents in the reporting quarter.
  4. Cash flow from operations was $25.4 million in the reporting quarter with capital expenditure coming it at $5 million. With that, Sheng Siong generated $20.4 million in free cash flow for the quarter, down slightly from the $24.3 million seen a year ago ($26.6 million in cash flow from operations and $2.3 million in capex).
  5. Sheng Siong’s balance sheet still remains rock-solid; as of 30 September 2015, it had $126 million in cash and equivalents and no debt.

In all, Sheng Siong had a good quarter with both revenue and profit up strongly. The retailer also reported positive free cash flow and had no debt on its balance sheet.

Operational highlights

During the quarter, Sheng Siong’s revenue growth had been due mainly to the addition of five new stores since December 2014. Comparable same store sales grew by 1.1%; this metric is important to track for retailers as it gives investors an idea of how the retail outfit’s existing stores are growing.

While the reporting quarter has been good, Sheng Siong’s management team cautioned that the competition in the Singapore market is expected to be keen while foreign worker restrictions could put pressure on the firm’s manpower costs.

Lim Hock Chee, Sheng Siong’s chief executive, had the following words on the quarter’s results:

We are pleased to sign a lease with the HDB for a new store at Dawson Road, which should be operational in November 2015. This will bring the total number of our stores to 39 and allow us to widen our presence. The five new stores opened in 2015 and December 2014 will continue to contribute to our revenue growth and bottom line. In addition, the potential expansion of our store at Block 506 Tampines to approximately 20,000 sq. ft by the end of 2016 and the re-configuration of the retail layout should allow us to capture more footfall in the area and serve our customers’ needs better.

Going forward, we will stay focused on expanding our retail network across Singapore, particularly in areas where we do not have a presence while being mindful of the prevailing uncertainties in the business environment. Nurturing the growth of the new stores remains one of our key priorities as well. We will also focus on increasing direct and bulk purchasing and capitalising on our Mandai Distribution centre to further drive costs down.

Foolish summary

At its closing price yesterday of $0.85, Sheng Siong traded at around 24 times its trailing earnings and carried a trailing-12-months dividend yield of 3.8%.

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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 contributor Chin Hui Leong doesn’t own shares in any companies mentioned.