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Sheng Siong Group Ltd’s Growth Track Record

Sheng Siong Group Ltd (SGX: OV8) is a Singapore-grown supermarket chain with outlets mainly located in the heartland of our city-state. In November 2017, the company ventured into China by opening a store in Kunming.

Investors who are interested in investing in Sheng Siong should look at its historical financial performance to see if it has been performing strongly, as well as to familiarize themselves with other aspects of the business. Past strong performance could mean the company may continue performing well into the future.

Here’s how Sheng Siong has done financially over the last five years.

Revenue growth

The chart below shows how Sheng Siong’s top line has grown from 2014 to 2018:

Source: Sheng Siong 2018 annual report

Sheng Siong’s revenue climbed from S$726.0 million in 2014 to S$890.9 million in 2018, which translates to an annualised growth rate of 5.3%.

The top-line growth did not come at the expense of spiraling costs. In fact, Sheng Siong has been able to keep its input costs under control. From 2014 to 2018, gross profit grew consistently from S$175.7 million to S$238.4 million. This meant gross profit margin improved from 24.2% to 26.8%.

Source: Sheng Siong 2018 annual report

Sheng Siong has been able to increase its gross margin over the years by having better buying prices, higher rebates from suppliers, volume discounts, and improvement in efficiency in the central distribution centre, as well as by selling a higher mix of fresh versus non-fresh products.

Net profit growth

With up-trending revenue and gross profit, net profit has also improved over the years. In 2014, Sheng Siong clocked in a net profit of S$47.6 million, and this swelled to S$70.5 million in 2018.Source: Sheng Siong 2018 annual report

Dividend growth

Higher net profit usually translates to a higher dividend. Sheng Siong has delighted shareholders with increased dividends over the last five years. The dividend rose from 3.0 Singapore cents per share in 2014 to 3.4 Singapore cents per share in 2018. That growth translates to an annualised increase of 3.2%.

Source: Sheng Siong 2018 annual report

What’s in store?

Sheng Siong has shown stable growth in its revenue, gross profit, gross profit margin, and net profit from 2014 to 2018. With that, its dividend per share has also improved.

Going forward, Sheng Siong is focused on increasing its reach in Singapore by constantly adding retail space to its portfolio. In China, its store in Kunming broke even in the first quarter of 2019, and Sheng Siong is looking to open a second store in the same city in the third quarter of 2019.

The homegrown supermarket chain’s growth in Singapore could saturate at some point, but if it’s able to create a niche for itself in the China supermarket space, shareholders could be rewarded handsomely. At Sheng Siong’s closing share price of S$1.04 on Tuesday, it had a price-to-earnings ratio of 22 and a dividend yield of 3.3%.

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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 has a recommendation for Sheng Siong Group Ltd. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.