Wednesday, February 12, 2014

Is it worth shopping for Sheng Siong?

Sheng Siong Group (SSG) has kicked off its e-commerce business in limited areas. The group is waiting for the pilot phase to be successfully completed before expanding to cover the whole of Singapore. This could be a prudent move as it shows how SSG makes calculated risks. 

SSG’s 90 per cent payout ratio dividend policy expires in FY14, and questions remain over its continuation. Should the payout ratio be decreased, SSG would lose some of its attractiveness as a yield play which would possibly affect the share price. In 2013, unfavourable rental markets saw SSG reluctantly attempting to acquire properties. This includes the Yishun Junction 9 which is awaiting final authority approval. 

Yishun is a mature estate but is set to benefit from URA's plan to rejuvenate the area. Another 40,000 homes will be added over the next decade to the existing 131,000 homes. The store's location in the upcoming Junction 9 itself sees captive shoppers in the form of the 186 residential units on the higher floors. Also, the decent car park size of 136 lots and its proximity to the Yishun ring road should provide strong traffic flow. OCBC says the acquisition price does appear to be on the high end with an implied capital value of $2,968 psf and yield of 2.8 percent. 

OCBC maintains its buy call with a target price of $0.70. CIMB maintains its outperform call with a target price of $0.74. It sees catalysts coming from earnings delivery from new stores. The average uplift expected among analysts is for a 24.4 percent rise in the share price.

No comments:

Post a Comment