The Good And Bad That Investors Should Know About Sheng Siong Group Ltd’s Latest Earnings Update

Sheng Siong Group Ltd (SGX: OV8) is one of the largest supermarket chains in Singapore with 48 stores located primarily in the heartlands of the island. The company also has one supermarket in China.

In late April, the company reported its 2018 first quarter earnings update. There are both positive and negative takeaways that investors may want to learn about. But first, let’s run through the company’s numbers.

The results

Here’s a condensed income statement from Sheng Siong for 2018’s first quarter:

Source: Sheng Siong 2018 first quarter earnings press release

We can see that Sheng Siong enjoyed a good quarter, with its revenue, gross profit, net profit, and earnings per share all up year-on-year.

The positives

Firstly, Sheng Siong’s revenue was up by 5.1% in the reporting quarter, mainly due to new-store openings (contributing to growth of 6.7%), comparable same store sales growth (a contribution of 5.6%), and the opening of its new supermarket in China (a 0.8% contribution). These were partly offset by the closure of stores, which dragged revenue growth back by 8%.

Secondly, Sheng Siong’s gross profit grew faster than its revenue, mainly due to a better sales mix of fresh products because of marketing efforts, and suppliers’ rebates.

Thirdly, the company’s balance sheet remained strong with zero debt and S$78.6 million in cash in 2018’s first quarter. Sheng Siong’s healthy finances put it in a good position to further expand its business.

The negative

In the outlook statement given in its earnings update, Sheng Siong expects competition in the supermarket industry to remain keen. In addition, the company cautioned that its gross margin would be lower if food inflation (potentially caused by disruptions to its supply chain, or by nations imposing trade tariffs) takes place.

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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 contributor Lawrence Nga doesn’t own shares in any companies mentioned. The Motley Fool Singapore has a recommendation for Sheng Siong Group.