Sheng Siong Group

Even if assuming that shengsiong can pack effectively, this can easily be replicated by its competitors easily. It takes just some smart ass to observe what is going on at SS and implement at its own shop. Isnt that what sam walton did?

(15-01-2013, 08:06 AM)CityFarmer Wrote:

(15-01-2013, 06:44 AM)yeokiwi Wrote: Their competitive advantage is their sale psf. Looking at the way Sheng Siong packs their supermarket, they can effectively pack a typical competitors' supermarket into half the required floor area.

By doing that, they can setup a supermarket in almost any place. Two or three shop houses together will suffice to setup a supermarket.

But, I am not sure how they can pass the fire inspection with that kind of density.

Base on my observation, SS stores don't look different from NTUC in term of space. I do not think it has an edge in term of space utilization versus NTUC.

You have to go to those smaller SS supermarkets. Those that I saw in AMK, Yishun and Punggol are packed with high density. It is definitely impossible to push a trolley around. Due to their tight space, SS has a wheeled basket for customers that is not found in competitors' supermarkets.

The cashiers' efficiency is also the highest among all supermarkets. It seems that they have some sort of rewards based on the no. of transactions done for the cashiers.

The fact that Sheng Shiong has managed to grow to its size today suggests that they are capable of exploiting the current gaps in the Singapore supermarket scene. While past performance is not a certain indicator of future success, I think the history has demonstrated that the Sheng Shiong management is certainly capable of standing up to the larger NTUC and Dairy Farm groups.

If you consider the business, while the competitive landscape might be brutal (as Carrefour has found out), but unless the Singapore supermarket scene degenerates into a "race to the bottom" scenario, Sheng Shiong will still be able to find ways to do business and grow over the longer term.

In terms of things specific to Sheng Shiong - their operating leverage in terms of higher psf sales vs competitors stands out as a competitive advantage. The recent investment into a distribution centre should help to control costs and improve efficiency over the longer term as they figure out how to make the facility work better. And management of course, has a decent track record.

All these are nothing that cannot be eroded (or copied by some "smart ass"). But a net margin of around 5% is hardly the most attractive industry to attract new entrants in a big way. With the size of the Singapore market, international giants would probably pass. But that does not mean that one cannot prosper by investing in a local player. Apart from trying to rubbish a company (which is actually the first thing one should do because every opportunity must be looked at from the downsides first), do not forget to look at the investment merit on a holistic basis as well.

IF for some reason the price becomes fair again, remember to take a second look.

(15-01-2013, 09:44 AM)thefarside Wrote: The fact that Sheng Shiong has managed to grow to its size today suggests that they are capable of exploiting the current gaps in the Singapore supermarket scene. While past performance is not a certain indicator of future success, I think the history has demonstrated that the Sheng Shiong management is certainly capable of standing up to the larger NTUC and Dairy Farm groups.

If you consider the business, while the competitive landscape might be brutal (as Carrefour has found out), but unless the Singapore supermarket scene degenerates into a "race to the bottom" scenario, Sheng Shiong will still be able to find ways to do business and grow over the longer term.

In terms of things specific to Sheng Shiong - their operating leverage in terms of higher psf sales vs competitors stands out as a competitive advantage. The recent investment into a distribution centre should help to control costs and improve efficiency over the longer term as they figure out how to make the facility work better. And management of course, has a decent track record.

All these are nothing that cannot be eroded (or copied by some "smart ass"). But a net margin of around 5% is hardly the most attractive industry to attract new entrants in a big way. With the size of the Singapore market, international giants would probably pass. But that does not mean that one cannot prosper by investing in a local player. Apart from trying to rubbish a company (which is actually the first thing one should do because every opportunity must be looked at from the downsides first), do not forget to look at the investment merit on a holistic basis as well.

IF for some reason the price becomes fair again, remember to take a second look.

I agree with your view. To add-on

Investment in technologies to streamline the operation is a big plus. In Singapore market, productivity is important, especially in labor. In retail business, a labor intensive business, it can easily erodes away the 5-6% net profit margin if not done right and earlier.

(15-01-2013, 08:46 AM)safetyfirst Wrote: Even if assuming that shengsiong can pack effectively, this can easily be replicated by its competitors easily. It takes just some smart ass to observe what is going on at SS and implement at its own shop. Isnt that what sam walton did?

In theory yes, but in practice it is very difficult, if you try starting a business copying a supply chain logistics model.

The best predictor is always the execution history. My acid test is if they can do well in Malaysia. My guess is NTUC cannot

(15-01-2013, 10:19 AM)specuvestor Wrote:

(15-01-2013, 08:46 AM)safetyfirst Wrote: Even if assuming that shengsiong can pack effectively, this can easily be replicated by its competitors easily. It takes just some smart ass to observe what is going on at SS and implement at its own shop. Isnt that what sam walton did?

In theory yes, but in practice it is very difficult, if you try starting a business copying a supply chain logistics model.

The best predictor is always the execution history. My acid test is if they can do well in Malaysia. My guess is NTUC cannot

I agree that if SS can execute in Malaysia where Tesco is also operating, it does say something about their skill.

Can you please elaborate why in practice its difficult for another retailer to copy "packing" up the store floor with stocks? Thanks.

did they pass the fire safety standard? i dunno if the relevant authority should look into their narrow walkway?

"Can you please elaborate why in practice its difficult for another retailer to copy "packing" up the store floor with stocks? Thanks."

It is relatively easy to start a mom and pop shop who get goods from importers. But I don't think that's the value of SS

They actually do imports to push down prices and drive volume. That's why they need to start a warehouse centre as their business expands. They are like your parallel import discount stores but dealing with perishables. In addition they are dealing with supply chain from wholesale import to retail

I don't think NTUC can do it because they are subsidized through rents and preferred bidding for locations. They are not going to have that overseas. If NTUC is really good, it can show us it can succeed overseas with equal platform competition, and then qualify to tell our people about entrepenuerehip. truth is NTUC is subsidized for a social purpose.

Hence if SS can compete with NTUC, which is subsidized, it already has comparative advantage.

MV = $0.62. PE of 20x similar to that of other supermarkets. NAV $0.1039 (no buffet). Dividend yield 4% which is reasonable.

This is more like a growth stock instead of an undervalue stock.

20 times earning seems high
looks quite overvalued now