Sheng Siong Group

[bb88]

based on the historical earnings, the dividend yield is ~7-10%?

[memphisb]

wow. they foreseen that the response wouldn't be good?

[Musicwhiz]

Business Times - 06 Aug 2011

Sheng Siong aims to raise $62.6m in IPO

Offer of 351.5m new and vendor shares at 33 cents apiece

By MINDY TAN

GROCERY retail chain Sheng Siong Group has launched its initial public offering (IPO) for a Singapore Exchange mainboard listing.

The group, which is geared up for aggressive expansion following its business consolidation leading up to the IPO, is aiming to raise $62.6 million in net proceeds from the offering. The 351.5 million invitation shares, comprising 201.5 million new shares and 150 million vendor shares, are priced at 33 cents apiece, a proforma price-earnings ratio of 10.4. The ratio is 'based on net EPS for FY2010 and post-invitation share capital of 1,341,500,000 shares'.

The issue is made up of a public tranche of 15 million shares and a placement portion of 336.5 million shares.

The company, which intends to distribute up to 90 per cent of its net profits for this year and next as dividends, believes this to be easily achievable, given its positive cash balance and the relatively low cost involved in setting up a new shop.

'The cost of opening a new shop is low; it merely involves the renovation and rental costs,' said Lim Hock Chee, chief executive of Sheng Siong. 'Plus, we already have more than 2,000 qualified employees so when we see a venue that is suitable for us, we will be ready.'

Wong Soong Kit, Sheng Siong finance director, pointed to the group's strong financials: 'At the point of listing, the group has (some) 38 million net cash, so the base is there.'

'In addition, (Sheng Siong is offering dividends of up to) 90 per cent net profit, but our Ebitda (earnings before interest, taxes, depreciation and amortisation) is higher than that. In a worst-case situation - we are at zero gearing now - the group has borrowing capacity,' he said.

Beyond Singapore's shores, the group is looking to expand into neighbouring Malaysia. It also has plans to increase the array of housebrands, from the existing 300 products under 10 housebrands (currently 1.5 per cent of the products it carries) to approximately 5 per cent in the long term.

This, it says, will enable the group to enjoy better profit margins, as the housebrands are sourced directly and produced exclusively for the group, lowering the overall cost structure compared to normal products. Housebrands currently contribute some 5 per cent to the company's total revenue.

The group's revenue grew to $628.4 million in FY2010 from FY2008's $610.2 million. The period also saw net profit more than doubling to $42.6 million in FY2010 from $20.6 million in FY2008. Net profit margins too climbed steadily from 3.4 per cent in FY2008 to 6.8 per cent in FY2010.

Sheng Siong, which was ranked second largest grocery retail chain by brand name based on its FY2010 revenue, has a 17.5 per cent market share according to Frost & Sullivan's study on the chain supermarket industry in March.

After listing, the family will retain a 73.8 per cent stake in the company.

Sheng Siong plans to use $20 million of net proceeds to expand the group's operations in Singapore and overseas. Another $30 million will be for repayment of a loan for Mandai Link Distribution Centre, its new corporate headquarters and warehousing and distribution facility.

The public offering closes on Aug 15 and trading is expected to take place on Aug 17.

OCBC Bank is the issue manager, underwriter and placement agent.

[bb88]

Erhm... Zero gearing but going to repay $30m in debt with the IPO proceeds? Am I reading correctly here?

[Satchmo]

Anyone notice that NTUC is expanding into the residental areas where smaller players like SS's marts are located? So, this could mean even more competition than before. Tho, SS's marts have the advantage of having a fresh produce section and (to me) house more product types per unit area.

And I think they are listing at a most inopportune time

And yeah, weird to say zero gearing but need to pay off loan

[memphisb]

Most have failed to notice that
NTUC have incorporate Credit card payment facilities for all its outlets after sheng siong start their own credit card.

[bran]

hi all, when the CEO said there is zero gearing, i think he is referring to his low net debt, defined as liabilities less cash and equivalents. There's still a low net debt, not zero, but he might have included other current assets in his statement

2010 end
----------
Total liabilities: 111mn
Current Assets
- Cash: 85.8mn
- Inventories: 26.4mn
- receivables: 4.7mn
Total: 117mn

Which begs the question, why raise the money in the first place? They can easily fund their expansion and repay liabilities from their cash holdings?

[freedom]

they wants to cash out and retire?

from the prospectus, it seems that none of their children is holding any position within the board or the management. Eventually, when the 3 brothers retires, no one from their family will continue the business. It is better for them to list in SGX.

[pianist]

compared to its bigger competitor Dairy Farm which presently has a pe of more than 20, sheng siong's pe of 10-12 seems cheaper?

[freedom]

if we use the average earning of the 3 years given, it would be 13+.

also, for the better year of 2009/2010, the profit was boosted by other income (almost 13/16 mil), which was not explained(or I did not find it). my guess should be gain from dispose of investments (Citi Group/China Hongxing, etc) from its cash flow statement.

so if we only consider operation profit, probably the pe would be around 20 as well.

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from another point of view, walmart, price/sales = 0.4, sheng siong, prices/sales = 0.6/0.7