6 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 six key insights about its business I picked up from its latest annual report.

For the first three insights, head here.

4. The silver lining

Sheng Siong’s chief executive officer, Lim Hock Chee, had the following comments to share regarding the ebb and flow of competition for retail space:

“Historically, there were more opportunities for leasing retail space when economic climate is not favourable, and without exception, I believe history will repeat itself.”

In 2016, Sheng Siong reported a tepid 0.2% increase in comparable same store sales as I mentioned in the first point. Lim believes that the anaemic economic environment contributed to the weak demand.

But, he also sees a silver lining. It is possible that competitors may hesitate to expand when economic conditions don’t look the best, thus leaving Sheng Siong with a higher chance to secure better locations and rental rates.

5. An eye on the long term

The pressure might be on for Sheng Siong in the near term, but the company has its eye on the longer term. Lim said:

“On a slightly longer time horizon, the scope to improve our sales mix to a higher percentage of fresh component looks promising as lifestyle changes will drive consumers from the traditional wet markets to the supermarkets.”

The comment above provides insight on how Sheng Siong views its value proposition to its customers – that is, to provide fresh food. Lim believes that having more fresh food in Sheng Siong’s supermarkets could drive more customers to visit the company’s stores instead of traditional wet markets.

6. Growth will come

Sheng Siong has its eye on more stores and more growth in the future. Lim said:

“With 43 stores, the central warehouse at Mandai is running out of space. We have leased a piece of land of approximately 1,800 square metres, adjacent to where the central warehouse is located, from JTC Corporation.

Tenders have been called for the construction of another 45,000 square feet of warehouse space, which will be linked to the existing warehouse.”

One sign of Sheng Siong’s future growth is that the retailer is looking to expand its warehouse in Mandai. Investors will have to observe what the future brings.

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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.