Sunday, September 16, 2018

Sheng Siong Group - Undemanding Valuation

With 48 stores located across the island, Sheng Siong Group (Sheng Siong) operates the third largest supermarket chain in Singapore that caters to the country’s mass market. Since its IPO listing in 2011, bottom line growth has continued to remain steady, driven by margin expansion from efficiency gains in the supply chain. Given its defensive business model and almost no foreign exposure, Sheng Siong’s business is relatively sheltered from global economic uncertainty.

Sheng Siong currently trades around a price-to-earnings multiple of 22.5 times, which is just slightly above its 7‐year average of 22.3 times. At its current valuation, KGI finds that it offers a good entry point given Sheng Siong’s resilience amid an uncertain economic environment. It also offers a dividend yield of  about 3.3 percent.

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