Sheng Siong Group

(11-06-2014, 09:04 AM)psolhawk Wrote: I stay opposite that block so I should have the most updated information? First floor is now helmed by enrichment centres and big-name tuition agencies. Hence parents can do groceries while kids are busy. First floor also has a halal zichar-style restaurant and a Indian rojak restaurant, popular at night and all times, notwithstanding the larger proportion of Muslims in Tampines. While one may discount this location as off-central, it will be the only major supermarket player catering to residents staying in Tampines North Block 400 plus region (no major supermarket I can think of), Tampines East Block 230 to 250 plus, Block 500 plus where Sheng Siong will be at. The nearest competitor to Sheng Siong will be Cold Storage at Tampines One. Different market segment. Different crowd doing groceries shopping at Cold Storage @ Tampines One, and Giant at Block 506. Plus the fact that we have MANY construction of ECs, DBSS and the future development of MORE BTOs at Tampines North and you are going to get a huge expatriate crowd coming on weekday and weekend nights. Those expats really love Sheng Siong. Plus, this will be the only Sheng Siong in Tampines, what more for people who love the brand of Sheng Siong, even if it is blind love for a chance at winning lottery-like prizes on the Sheng Siong show.

There is also NTUC at Tampines Mall, but I agree with what you said except the food is so-so

Don't get me wrong. I'm just saying the lease is not good deal per se but fit very well with SS strategy. Like I said shops around it will benefit except the wet market In other words SS will add value to that corner.

This corner of "Central" has been neglected as long as I can remember with previously a shopping mall and a food court there. I don't recall any SS that is 3 storeys. The one at Bedok is double storey. Been around on-off Tampines since the interchange was a terminal so I think I have a good idea

The third floor sells lottery so I think it will be a hit with groceries-shopping aunties and accompanying uncles.

Is this an example of business (S-11 in this case) make more money from their property investment than their actual business of running coffeeshops?


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Unlike some countries, property tax here is low. Furthermore long run capital gain is probable.
So maybe it makes business sense unless the borrowing cost is high.

Also owning Property provide stability in operation and can also help generate extra returns. You do not run the risk of rental escalation and moving out to not so ideal location. The impact will be significant especially on business continuity for such business as SS.

(11-06-2014, 01:59 PM)opmi Wrote: Is this an example of business (S-11 in this case) make more money from their property investment than their actual business of running coffeeshops?


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same for MacDonald

I thought Tampines is a pretty good deal as well.

Let's look at the numbers.

From AR
2013 => operating lease = 19.4mio on GFA 400k sqf => rent == $4.04 psf pm
2012=> operating lease = 16.6mio on GFA 400k sqf => rent == $3.46 psf pm
2011=> operating lease = 14.5mio on GFA 340k sqf => rent == $3.55 psf pm

Since then they have announced plans to acquire 3 sites, of which
Kallang fell thru:

Yishun => 54.9mio for 1729 sqm for 99yrs => depreciation == $2.45 psf pm
Kallang => $13.5 mil, for 8385 sqft for 60yrs => $2.24 psf pm
Tampines => $65 mil, with GFA of 3876 sqm for 76yrs => $1.69 psf pm.

Essentially they are trying to replace expensive rental with cheaper depreciation - think the locations they have chosen make sense and certainly looks good on a price perspective.

That said, Yishun+Tampines will mean capital outlay of 120mio (albeit spread over periods til 2017//2018) agst cash of 110mio on the books - balance sheets will start to change in a meaningful way i think.

(13-06-2014, 04:26 PM)AlphaQuant Wrote: I thought Tampines is a pretty good deal as well.

Let's look at the numbers.

From AR
2013 => operating lease = 19.4mio on GFA 400k sqf => rent == $4.04 psf pm
2012=> operating lease = 16.6mio on GFA 400k sqf => rent == $3.46 psf pm
2011=> operating lease = 14.5mio on GFA 340k sqf => rent == $3.55 psf pm

Since then they have announced plans to acquire 3 sites, of which
Kallang fell thru:

Yishun => 54.9mio for 1729 sqm for 99yrs => depreciation == $2.45 psf pm
Kallang => $13.5 mil, for 8385 sqft for 60yrs => $2.24 psf pm
Tampines => $65 mil, with GFA of 3876 sqm for 76yrs => $1.69 psf pm.

Essentially they are trying to replace expensive rental with cheaper depreciation - think the locations they have chosen make sense and certainly looks good on a price perspective.

That said, Yishun+Tampines will mean capital outlay of 120mio (albeit spread over periods til 2017//2018) agst cash of 110mio on the books - balance sheets will start to change in a meaningful way i think.

I concur. One minor note that the dep expense will be higher in book, and likely similar as average rental expense.

We will start to see mortgaged debt in the balance sheet, once the Tampine deal completed, IMO

(vested)

To recap 3 of us have discussed about this 7 months ago
http://www.valuebuddies.com/thread-1240-...l#pid66075

The operating lease is not going to be comparable to the depreciation cost of an asset heavy strategy that will drag down ROI. But as discussed I can see the logic from a business owner point of view.

The way to mitigate the decline in ROA is of course to leverage and increase ROE so I agree with CF. The strategy has changed. I think short term cashflow will be affected until they start operation on Yishun and Tampines. As long as they continue to pay the absolute dividends I think investors would be patient to wait.

NB Yishun purchase is based on existing SS shops but Tampines is new, though gut feel is a good risk/reward site. But Alpha Quant stated it most accurately:

(04-11-2013, 04:05 PM)AlphaQuant Wrote: But whether a location is a hit or miss is perhaps not as easy to tell before Day 1. The 2012 AR says ShengSiong has 33 outlets - in 2013 there are 25. So there is a net closure of 8 outlets - there's no mention of why but i will probably think that they were unprofitable. In a way it makes sense, since a location proven to be successful will probably already have a NTUC/Dairyfarm there, hence it does not make sense to open another one to compete; a location which does not have them is untested and only time will tell. The fact that there were 8/33==24% unsuccessful locations prob shows SS does not have perfect knowledge in location choices (which is perfectly acceptable).

Good company for consumer goods... OCBC target price is S$0.68 with dividend yield of 4% based on current price.

Vested and accumulating...

Price action indicate that the market is coming around to embrace the company's strategy of getting future growth back on track.

Given the advantages a certain GLC cooperative have in securing "good sites" for supermarkets, Sheng Shiong's strategy of buying may be the only way to get in on good greenfield sites.

I look forward to more buys from them, and I'm willing to accept some reduction in dividends to fund the cash outlay for such a strategy.