Sheng Siong Group

[Musicwhiz]

20 times earning seems high
looks quite overvalued now

Seems high compared to what? Competitors?

What would be the long-term mean PER and dividend yield for this Company?

[CityFarmer]

20 times earning seems high
looks quite overvalued now

Seems high compared to what? Competitors?

What would be the long-term mean PER and dividend yield for this Company?

The stock is traded at PE 20, PB of 5-6 with dividend yield of 4.4%

If comparing with Retail sector average PE of 21, and average dividend yield of 2.2%, it is just fairly valued IMO

[sgd]

I'm vested 30 lots in this

very long term investment only

[a74henry]

20 times earning seems high
looks quite overvalued now

You can compare to Dairy Farm which owns Giant, Cold Storage.

[felixleong]

I think the retail sector valuation is quite high

will look again if PE is like 15 times with yields of 5% or better

[CityFarmer]

I think the retail sector valuation is quite high

will look again if PE is like 15 times with yields of 5% or better

As a reminder, Sheng Siong commitment to distribute 90% of PAT, applies to FY2011 and FY2012 only. After that there is no formal dividend policy

In other words, the subsequent dividend yield might be lower, even PE go down.

[thefarside]

In the latest results release management has guided for 90% distribution for FY2013 and 2014 as well.

[a74henry]

The management is fair to its shareholders by giving the dividend guidance.

I have kept my shares since IPO. My dividend yield = 8% (based on IPO price). Current dividend yield = 4.3% (based on last distribution). If its EPS continues to grow, I may enjoy 10% yield in a number of years.

(Vested)

[CityFarmer]

In the latest results release management has guided for 90% distribution for FY2013 and 2014 as well.

OK, i re-checked, the commitment is renewed till 2014 in their press release. I missed it.

One of the reason the share price continue to advance after 2012?

[CityFarmer]

Maybank Kim Eng latest report on Sheng Siong. Sheng Siong is catching up on online market.

Potential Ace Up Its Sleeve

Moving into B2C e-commerce. Sheng Siong will launch its e-commerce platform in 1H13. Despite being a latecomer to online retailing, we believe this move is a step in the right direction as shopping on the Internet will inevitably erode traditional grocery shopping in the future. We expect Sheng Siong’s e-commerce platform will complement its warehouse capabilities and serve as a supplementary sales channel to its traditional brick and mortar channels. Maintain BUY with our street high TP unchanged at SGD0.70.

First movers do not always have the advantage. Both NTUC FairPrice and Cold Storage have been operating online as early as the 1990s. Various Internet start-ups have also appeared in recent years in response to changing consumer habits and an increasingly cosmopolitan population that finds online shopping a breeze. While Sheng Siong may be a late comer, it has had ample opportunity to study the online grocery shopping model to (1) avoid spending excessive investment and (2) get the products offering right.

Inventory software ready to go. Sheng Siong has set aside approximately SGD20m of the net proceeds from its IPO for the development and expansion of grocery retailing in Singapore and overseas. Sheng Siong will implement its E-Commerce model in stages to ease it into its current “Pick to Light” inventory System that is currently in use at its Mandai warehouse. Initial stages would include Call to Delivery and Online Selection, following which the customers will pick up their ordered goods through a drive-in or a simple walk in. Eventually, this could become a full home delivery service if the demand justifies it.

Low initial investment. The initial stage will not require much investment, as it will leverage on its warehouse capabilities, then systematically picked by workers in stores. Trial period will last at least two to three quarters with Home Delivery to be considered next. The initial offering of Store pick-up is likely to be at Thomson outlet, where there is limited parking, and will be ideal as it is situated around several residential estates.

Still our favourite neighbourhood supermarket. We expect the online channel will take at least a couple of quarters to gain momentum and will be rolled out progressively by district. We have a Street-high TP of SGD0.70 on our favourite supermarket due to its healthy FY13 growth and 4+% yield on the back of a 90% fixed payout for the next two years.