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Sheng Siong Group Ltd – The Positives And Negatives That Investors Should Know About Its Q2 2017 Results

Sheng Siong Group Ltd (SGX: OV8) is one of the largest supermarket chains in Singapore. The company’s network of 42 stores is primarily located at the heartlands of the island. The company was established in 1985 and listed in 2011.

The company has recently reported its Q2 2017 financial result. In this article, we will look at the good and bad from the announcement.

But before we dive into the details, let’s have a quick overview of the result.

Source: Sheng Siong Q2 2017 Result Announcement

Overall, Sheng Siong’s 2nd quarter FY17 result improved as compared to the same period last year, with all metrics delivering positive performance on a year-on-year basis.

Positives

There are a few positives that investors may want to know from the latest result.

First of all, revenue was up by 6.8%, mainly due to new stores opening (5.2%) and a 1.6% same store sales growth.

Secondly, gross margin expanded by 0.5% mainly because of mainly because of lower input cost from efficiency gains derived from the central distribution centre, a higher level of suppliers’ rebates and a better sales mix of higher gross margin fresh versus non-fresh produce.

Moreover, the company continued to have a strong balance sheet with zero debt and S$69.6 million in cash. With a strong balance sheet, Sheng Siong is in a good position for further expansion of its stores.

Negatives

Despite all the positives, there are be two negative factors that investors might want to pay attention to.

First of all, the same store sales growth was partially affected by the decline in footfall at some of the stores. Excluding such impact, same store sales would have increased by 1.7% quarter-on-quarter.

Secondly, the business outlook might not be overly positive since competition in the supermarket industry remains keen, especially with Amazon recently entering the fray with its Prime service.

Conclusion

Overall, a positive quarter for Sheng Siong whilst competition remains strong going forward.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Amazon. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.