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NRA Capital Pte Ltd

Written by: NRA Team

Tuesday 23 Jul 2013

Sheng Siong Group - 2Q13 results review

Target to initial e-commerce pilot project in 2H2013

Sheng Shong 1H2013 net profit declined by 20.4% yoy to S$19.0m. However, after excluding non-core items in 1H2012, consisting of a one time gain of S$10.5m from the sale of the warehouse and a provision of S$1.6m for prior year's tax, the core profit of S$19.0m is 26.7% higher than 1H2012's core profit of S$15.0m.

Sheng Shong 1H2013 net profit declined by 20.4% yoy to S$19.0m. However, after excluding non-core items in 1H2012, consisting of a one time gain of S$10.5m from the sale of the warehouse and a provision of S$1.6m for prior year's tax, the core profit of S$19.0m is 26.7% higher than 1H2012's core profit of S$15.0m. The board declared a interim dividend of 1.2 cts compare to 1 ct last year and the dividend will be paid on 23 August 2013.
 
Key notes for 2Q2013:
- Gross profit margins improved yoy and qoq to 23.2%.
- Total retail space incresed by 8.7% yoy to 400,000 sqft as at 30 June 2013.
- Improved working capital requirement.
- Recorded lower PPE on depreciation.
 
Business Outlook:
Competition in the supermarket industry remains keen and with interest rates moving up and major central banks driving up inflationary expectations, consumers will continue to be even more cost conscious. This may affect its ability to pass on increases in input cost in full to the customers.
 
One of its competitors had re-branded their chain of supermarkets and they expect to see keener competition. The Group is still looking for suitable retail space in areas where the Group does not have a presence. However, competition for retail space has not abated and looking for suitable retail outlets may be challenging.
 
Costs pressures, in particular, manpower costs are mounting across the entire economy. Without exception, the supermarket industry is also facing a tightening of availability of foreign workers. Cost is expected to rise because of higher levies for the employment of foreign workers. There are also market pressures to adjust upwards the wages of low-wage staff. 
 
Food inflation was 1.8% in the first five months of this year compared with the same period in the previous year Food inflation may spike because of unforeseen changes to weather, supply chain disruption etc, as evidenced by the increase in vegetable prices in April and May 2013. The Group may not be able to pass on increases in prices in full to the customers.
 
As some of its old stores in matured housing estates have seen declining same store sales, the Group may be earmarking these stores for major re-fitting, which could mean a month or so of lost sales for each of the affected stores.

 

Additional Company Specfic ReportsDate
Sheng Siong Group - 2Q13 results review
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23 July 2013
IPO Watch - Sheng Siong Group Ltd
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12 August 2011


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