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

Last Friday, Sheng Siong Group Ltd  (SGX: OV8) reported its 2017 first quarter earnings. The reporting period was for 1 January 2017 to 31 March 2017.

As a quick background, Sheng Siong is one of the largest supermarket chains in Singapore. The company’s network of over 40 stores are primarily located in the heartlands of the island.

Financial highlights

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

1. For 2017’s first quarter, Sheng Siong’s revenue grew 4.1% year-on-year to $217.1 million.

2. Profit for the period followed suit, climbing 4.3% year-on-year to $17.1 million.

3. Consequently, earnings per share (EPS) rose 4.6% from 1.09 cents in 2016’s first quarter to 1.14 cents.

4. Cash flow from operations was $7.6 million in the first quarter of 2017 with capital expenditure coming in at $2.7 million. With that, Sheng Siong generated positive free cash flow of $4.9 million in the reporting quarter, up from the negative $12.3 million in free cash flow seen a year ago ($5.32 million in operating cash flow and $17.6 million in capex).

5. As of 31 March 2017, Sheng Siong had $68.3 million in cash and equivalents and no debt. This is a slight increase from the $63.5 million in cash and equivalents and no debt that Sheng Siong had at the end of 2016.

In all, Sheng Siong put in another solid quarter with steady revenue and profit growth. The retailer still maintains a debt free balance sheet and generated positive free cash flow.

Operational highlights

Sheng Siong’s revenue increased because of new store additions that more than offset the Loyang store and flat same store sales growth. Sheng Siong said that its sales were affected by lower footfall in areas that have felt the impact of the oil and gas rout. Elsewhere, Sheng Siong’s gross margin improved on bulk handling and promotions.

Lim Hock Chee, Sheng Siong’s chief executive officer, added commentary on the quarter’s results:

“We have re-opened our Loyang store with an area of approximately 7,200 sq ft in late February 2017 while our Block 506 Tampines Central store is still undergoing renovation and it is expected to be completed by June 2017.

We will remain focused on our retail network expansion plan across Singapore, especially in areas where we do not have a presence. Besides that, one of our key strategies includes nurturing the growth of the new stores. Capitalising on the infrastructure at our Mandai Distribution Centre, we will continue to increase direct and bulk purchasing and change the sales mix to a higher proportion of fresh produce to enhance gross margin.”

Sheng Siong also said that its Kunming subsidiary in China has taken vacant possession of a leased retail space and is working towards opening a supermarket. The subsidiary had originally planned to open a supermarket at the end of 2016, but the store opening has been pushed back to the third quarter of 2017.

At its closing share price $0.98 last Friday, Sheng Siong traded at 23 times trailing earnings and has a trailing 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.