Sheng Siong Group

[steel]

BUSINESS TIMES, February 24, 2012, 11.29 am (Singapore time)

Sheng Siong Q4 profit falls 48.2%, plans 1.77cts/shr dividend

By CARINE LEE


Sheng Siong Group Ltd on Friday reported a 48.2 per cent decrease in year on year profit to $3.75 million for the fiscal fourth quarter ended Dec 31, 2011.


Turnover slipped 6.1 per cent in the quarter to $138.86 million from $147.95 million a year ago.

Closure of two outlets lowered revenue for the fiscal full year ended Dec 31, 2011 by 8 per cent year on year to $578.44 million.

Profit for the full year decreased 36.1 per cent to $27.26 million from $42.64 million a year ago, due to absence of one-off investment gains.

Consequently, earnings per share for the full financial year ended Dec 31, was 2.21 cents, down from 3.74 cents a year ago.

The group has proposed a 1.77 cents per share dividend, which amounts to a payout ratio of 90 per cent.

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BUSINESS TIMES 24, 2012, 11.29 am (Singapore time)

Sheng Siong Q4 profit falls 48.2%, plans 1.77cts/shr dividend

By CARINE LEE


Sheng Siong Group Ltd on Friday reported a 48.2 per cent decrease in year on year profit to $3.75 million for the fiscal fourth quarter ended Dec 31, 2011.


Turnover slipped 6.1 per cent in the quarter to $138.86 million from $147.95 million a year ago.

Closure of two outlets lowered revenue for the fiscal full year ended Dec 31, 2011 by 8 per cent year on year to $578.44 million.

Profit for the full year decreased 36.1 per cent to $27.26 million from $42.64 million a year ago, due to absence of one-off investment gains.

Consequently, earnings per share for the full financial year ended Dec 31, was 2.21 cents, down from 3.74 cents a year ago.

The group has proposed a 1.77 cents per share dividend, which amounts to a payout ratio of 90 per cent.

[shanrui_91]

sheng siong is too small a player in the industry to be able to compete well against NTUC and Dairy Farm.

Firstly, with its small size, it is not going to be able to buy goods at a cheaper price than the other 2 players. Secondly, its competitors have an intensive range of housebrands which adds on to profit margin. NTUC goes for a concentrated approach while Dairy Farm goes for variety. Comparatively, Sheng siong has a very limited range of housebrand due to its lack of scale. Thirdly, both NTUC and Dairy Farm are able to position themselves in the different spectrum of the industry, while shengsiong is still stuck in the mass-supermarket section.

Expansion is the only way for it to expand its revenue and profits, but then again the other 2 players are in a much better position to expand and have also been doing so. A dividend payout ratio of 90% is not going to be good for a long-term shareholder of this company.

[d.o.g.]

both NTUC and Dairy Farm are able to position themselves in the different spectrum of the industry, while shengsiong is still stuck in the mass-supermarket section.

Fairprice was set up to combat profiteering and to keep basic groceries affordable i.e. serve the mass market. The fact that Sheng Siong has not only survived but prospered suggests that Fairprice may have gotten sloppy over the years.

A dividend payout ratio of 90% is not going to be good for a long-term shareholder of this company.

The 90% payout is only good for FY11 and FY12. There is no promise to pay anything after that.

[shanrui_91]

I do agree on the FairPprice objective given that it is after all a co-operative and social enterprise. Has Fairprice get sloppy over the years? From 2006 to 2010, total number of Fairprice stores expanded from 82 to 103. Similarly, DFI has also added 19 stores. However, total store counts have not increased much for Sheng siong.

Why was sheng siong able to display an awesome result from 2008 to 2010, increasing profit from 20m to 40m? In fact, revenue only increases by 4%. The main reason is that it had purchased more of its supplies from direct suppliers instead of wholesalers. Going forward, how much more of this cost will it be able to save?

The only way to grow its profit will be to increase the number of stores and to increase its own range of housebrands. Supermarkets do not just earn profits from us, the consumer, but they also earn income from manufacturers.

Manufacturers, usually the top brand, will pay a fee known as slotting fee to get their products to the best position, which can means 10x the revenue if it is at the counter. They will also have to pay a co-op fee when new products are to be introduced to the market. As space is the most important inventory of a supermarket, introducing a new product will mean taking up the space of another products, which is a risk as the new products might end up decreasing the total sale of that category. Other than that, they have to pay promotion rebates to supermarket, for them to offer a discount to the product.

Thus, how big a retailer is will determine how much of a rebates and income that they will get from manufacturers. Therefore, it might be wiser to retain its earning and seek expansion instead of paying dividends to its shareholder. Sheng siong game show has been able to build up its brand but it has since been slowly eroding. And for a supermarket to be successful, inventory turnover needs to be as high as possible such that in the case of Walmart, manufacturers are in a way sponsoring them to put their products for sale while allowing them to collect the profit. For Sheng siong, its inventory turnover is 4x compared to NTUC which can turnover its inventory at 15x.

[edragon]

Closure of two outlets lowered revenue for the fiscal full year ended Dec 31, 2011 by 8 per cent year on year to $578.44 million.

Doing just the opposite Would that be a positive?
Anyone can comment on the profitability of their wet markets which have to follow the 'guidelines' of HDB.

[shanrui_91]

For years, modern trades like supermarkets and convenience store has been quite successful in fighting the market share from the traditional trades. However, wet market has still been a part of the traditional trade whose market share is still holding pretty strong.

In the case of the wet markets that they are operating, it is more like having a coffee shop and you charge rental fees to all your stallholders, which will be a form of recurring income. However, they will not be able to convert them into any other forms else HDB will revoke their license. They are neither allowed to determine the selling price of the grocery by the stall owners.

Profits will therefore increase if they can increase rental (likely to face opposition) or increase the space for rental. For this portion, you can definitely try to chit chat with those operating in sheng siong wet market for more information and insights as to how they are being charged. HDB has said before that any rental increase must take into account that the wet market stall owners can operate in the long run

[money]

There is little reason to expect shengsiong to do much better or much worse than NTUC or DairyFarm or Shop&Save, etc. All will stay profitable, some slightly more profitable, some slightly less.

but if you will pay for it at such a high price now (46 cents), you will probably not lose money in the long run but you must be contended with a low dividend yield

[Contrarian]

both NTUC and Dairy Farm are able to position themselves in the different spectrum of the industry, while shengsiong is still stuck in the mass-supermarket section.

Fairprice was set up to combat profiteering and to keep basic groceries affordable i.e. serve the mass market. The fact that Sheng Siong has not only survived but prospered suggests that Fairprice may have gotten sloppy over the years.

A dividend payout ratio of 90% is not going to be good for a long-term shareholder of this company.

The 90% payout is only good for FY11 and FY12. There is no promise to pay anything after that.

> Fairprice was set up to combat profiteering and to keep basic groceries
> affordable i.e. serve the mass market.

Some smart govt servants raised the idea of listing fairprice. It was shot down by Chandra Das when he was the chairman.

> The fact that Sheng Siong has not only survived but prospered
> suggests that Fairprice may have gotten sloppy over the years.

Sheng Siong rental is much lower as the shop is not in prime position, and they use less space. Fairprice in recent years went for shopping malls.

I believe fairprice credit terms with suppliers were 60 days MINIMUM, and a guaranteed housebrand. Sheng Siong could have offered better terms
with no housebrands.

Fairprice is geared to serve a social mission, Sheng Siong is listed entity.

[shanrui_91]

sheng siong is trying to snatch some of the wet market market share as no supermarket has been successful in doing do. More than half of those buying fresh meat, vegetable and seafood still buy from the wet market instead of supermarket. They are trying to be the supermarket that offers the same quality of fresh food as the wet market, at least in the minds of people.

If sheng siong can be successful in this area (remain to be seen though they are still far), it will then be able to create a niche market of their own and this segment has a higher profit margin than the other supermarket items.

Anyway, their dividend payout ratio of 90% are promised only for the first 2 years. They will still need to retain profit to fund their expansion, so don't expect the dividend yield to remain.

[KopiKat]

sheng siong is trying to snatch some of the wet market market share as no supermarket has been successful in doing do. More than half of those buying fresh meat, vegetable and seafood still buy from the wet market instead of supermarket. They are trying to be the supermarket that offers the same quality of fresh food as the wet market, at least in the minds of people.

I thought they wanted + tried to convert their acquired wet markets into a Supermarket? Due to the public outcry, the relevant government body came out to clarify that Sheng Shiong can't do that?

A bit outdated info,

In 2009, Sheng Siong acquired five wet markets with the intention of converting them into air-conditioned markets. However, this plan met with negative public feedback and the government ruled that the sites had to continue functioning as wet markets.

I think they're now stumped on what's their next move. Probably nothing else they can do, except to raise the rents as and when due, till they can come up with some idea?