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3 Key Insights from Sheng Siong Group Ltd’s 2016 Annual Report

Sheng Siong Group Ltd  (SGX: OV8) released its 2016 annual report in April this year.

The retailer owns one of the largest supermarket chains in Singapore – it has a network of over 40 stores that are primarily located in the heartlands of the island.

The following are three key insights about its business I picked up from its latest annual report:

1. A dour near-term outlook

Sheng Siong’s chief executive officer, Lim Hock Chee, wrote about the company’s near-term outlook:

“The uncertain economic conditions globally and locally have affected retail spending in Singapore and it is not expected to improve spectacularly in the near term. Consumers would continue to be more cost-conscious and would also be looking for more good value for money buys.”

In 2016, Sheng Siong reported a tepid 0.2% increase in comparable same store sales. Lim believes that the lacklustre economic environment contributed to the weak demand.

2. Competition is heating up

The supermarket space has always been competitive. But it is not about competing on prices alone. Lim said:

“In the last couple of months, some smaller supermarket operators have bid for new HDB shops at record high rental which we think do not make economic sense. We are working assiduously to look for new retail space but will remain prudent when making our choice.”

Sheng Siong has been facing increasing levels of competition for new retail space at reasonable rental rates.

3. Defensive moves

Speaking of competition for rental space, Sheng Siong has also moved to shore up its competitive position in key areas. Lim said:

“We have acquired the HDB shop at Block 209 New Upper Changi Road, where our Bedok store is located for defensive reasons. This is a key store and it is located within the recently upgraded Bedok Town Centre, where footfall is heavy.”

As a follow-on comment, Lim reported that the company’s Bedok store managed to record low-single digit growth in revenue despite the overall flat performance of the company.

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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.