Sheng Siong Group Ltd (SG:OV8) share price has risen 25% year-to-date, scoring an impressive gain for investors.
The stock’s performance is pleasing, considering that the Straits Times Index (SGX: ^STI) is down around 6% this year. Despite the run-up in Sheng Siong’s share price, here are five reasons why I believe that the stock still has room to run.
For the first three reasons, please click here.
4. Growth in China
The group currently has one supermarket in China. Sales in that outlet have improved in the latest quarter and Sheng Siong is hoping that it can continue to grow its brand in China. Although there might be a unique set of challenges in the China market, there are certainly huge growth opportunities that if Sheng Siong can tap into, might result in the next chapter of growth for the company.
5. Robust balance sheet
Sheng Siong’s free cash flow generation was a commendable S$60.8 million, while its balance sheets remains robust flushed with S$75.7 million in cash and zero debt. The group generated S$43.3 million from operations in the first half of 2018 and spent just S$15.2 million on new investments, giving it a free cash flow of S$28.1 million in the first half of the year. The strong cash generation gives it the financial muscle to support new growth opportunities.
The Foolish bottom line
Sheng Siong’s share price has reflected the positive results from the company.
Although its share price has risen considerably over the past eight months, I believe there is upside for investors. At its current price of S$1.16, Sheng Siong shares sport a price-to-earnings multiple of around 24 and a price-to-book ratio of 6.2. At first glance, the valuation may seem expensive. But considering the company’s track record, management nous, growth prospects and financial strength, Sheng Siong shares might not really be as expensive as it looks.
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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 Sheng Siong Group Ltd. Motley Fool Singapore contributor Jeremy Chia doesn't own shares in any companies mentioned.