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The Good And Bad That Investors Should Know About Sheng Siong Group Ltd Right Now

Sheng Siong Group Ltd (SGX: OV8) 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.

Sheng Siong recently announced its latest earnings update. Let’s look at the positives and negatives that investors should know from the results.

What’s to like

First of all, Sheng Siong reported growth in the revenue and net profit for the quarter ended 31 March 2019. The top-line was up by 10.1% year-on-year to S$251.4 million while the bottom-line improved 6.0% year-on-year to S$19.4 million.

Secondly, the company’s store count grew from 48 in the same period last year to 54 this quarter. Given that these stores are still new, we can expect revenue to improve further in the coming quarters as these stores mature.

Last but not least, the company’s balance sheet remained strong with no debt and S$86.3 million in cash. Such a strong balance sheet puts Sheng Siong in a good position for further expansion with new stores.

What’s not to like

To begin with, Sheng Siong reported a negative same store sales (-1% year-on-year). According to the company, this was driven by cautious consumers’ sentiments and the opening of new supermarkets in the vicinity of some of its existing stores.

Next, gross profit margin for the quarter was 26.1%, down slightly by 0.1% as compared to the same period last year. This marked a reversal from prior periods where the margin consistently showed improvement.

A Foolish conclusion

Overall, it was a good start to 2019 for Sheng Siong with growth in revenue and net profit, partially offset by weaker same store sales and slightly lower gross profit margin.

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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.