Last Friday, Sheng Siong Group Ltd (SGX: OV8) announced its 2019 first quarter earnings update. As a quick introduction, Sheng Siong is one of the largest supermarket chains in Singapore. The company’s network of 54 stores are primarily located at the heartlands of the island. The company was established in 1985 and listed in 2011.
Here, let’s look at 10 things that investors should know from its latest earnings update.
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- Revenue for the quarter improved 10.1% year-on-year to S$ 251.4 million.
- Gross profit improved 9.6% year-on-year to S$ 65.5 million.
- Similarly, net profit grew 6.0% year-on-year to S$19.4 million.
- Consequently, earnings per share (EPS) was up by 4.9% year-on-year to 1.29 cents.
- Gross margin margin for the quarter was 26.1%, 0.1% lower than that of last year.
- For the quarter, Sheng Siong generated operating cash flow of S$9.7 million, down from S$14.2 million a year ago. The lower cash flow was due to unfavourable movements in working capital.
- Sheng Siong had cash and cash equivalents of S$86.3 million with no debt, as of 31 March 2019.
- Total revenue growth of 10.1% was driven by new stores opening (10.6%) and improvement in supermarket in China (0.5%), offset by negative comparable same store sales (-1.0%).
- The company did not recommend any dividend for the quarter.
- Sheng Siong gave the following outlook:
“The industry is expected to remain competitive. Besides competitive pressures, gross margin could be affected if input cost is increased because of food inflation which could be caused by disruption to the supply chain or changes to prices caused by nations imposing trade tariffs.
The Group has just secured three new HDB shops at Bukit Batok Block 292 (4,850 square feet), Anchorvale Road Block 351 (5,400 square feet) and Sumang Lane Block 231 (5,530 square feet) and these three new stores should be operational before the end of May 2019. These stores were part of the batch of six stores which were released by HDB in a recent re-tendering exercise. The Group will continue to look for retail space in areas to serve unreached and new customers, but will continue to bid, in a rational manner for new HDB shops.
The subsidiary in China will be opening their second supermarket in Kunming in the second half of 2019 and will continue to promote and build the “Sheng Siong” brand in Kunming China.”
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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 Lawrence Nga doesn’t own shares in any companies mentioned. Motley Fool has a recommendation for Sheng Siong Group Ltd.