A supermarket chain holdings in Singapore review - Sheng Siong Group

3 August   2019

Dear Fellow Investor,

Today I will review one of our Singapore holdings Sheng Siong Group, which is a supermarket chain.

When I visited Singapore a few years ago. I noticed prices at a Sheng Siong market were cheaper than supermarkets in the shopping malls  The fruit  vegetables and meat  were fresher, cleaner and better presented  than other markets and they had a wide selection of well displayed fish and meat. I decided to put the share on my watch list and after reviewing their financials decided to buy for our managed accounts.

They have performed reasonably well, are net cash and just raised their dividend now about 3.3 %.

Sheng Siong Group 2nd Quarter 2019   earnings update: 

Growth is picking up.

State of the business now

The following shows some of the key numbers to track for Sheng Siong from Motley Fool Research Singapore: 

·      Revenue grew 11.8% year on year to S$238.2 million.

·      Gross profit margin inched up by 0.1 percentage point to 27.4%  

·      Net profit climbed 7.6% year on year to S$18.4 million.

·      Earnings per share (EPS) were S$0.0123, up 7.9% compared to 2018’s second-quarter EPS of S$0.0114.

·      As of 30 June 2019, Sheng Siong had S$82.9 million in cash and equivalents and no borrowings. That is an improvement from a year ago where the supermarket retailer had S$75.7 million in cash balance with no debt.

·      For the reporting quarter, operating cash flow was S$33.8 million while capital expenditure was S$6.0 million. Sheng Siong generated S$27.8 million in free cash flow, up around 20% from S$23.2 million in free cash flow raked in a year ago (operating cash flow of S$29.2 million and capital expenditure of S$5.9 million).

·      Sheng Siong has increased its interim dividend by 6% from S$0.0165 per share to S$0.0175. 

Despite the world stock market turmoil, they have held steady now at SGD 1.15 per share.   For the current environment, Sheng Siong is a good space to be in.  It is super defensive and well managed with a management who are cost conscious and share holder friendly. They have not been effected by the trade war.

Our portfolios have weathered the on going storm of volatility and emotion driven price action and we need to remain defensive, value orientated and patient for the pessimism and gloom cycle to turn. While we wait we collect our dividends

On 14-19  August we will be visiting clients in Sandakan and Kota Kinabulu. as well as enjoying nature, the seafood and the laid back environment . I will keep my eyes out for a profitable investment

Invest well and grow your wealth,
Bill

Critter of the week is a lion in a famous painting by Leonardo De Vinci which is exhibited in the National Museum in Kuala Lumpur. The exhibition will run until 15 August and is FOC. The 12 Leonardo paintings are reproductions which appear real. For some reason am unable to rotate the image to get a better view of the lion.