SG: Sheng Siong Group- Pickup in revenues as expected

Stock Name: Sheng Siong
Company Name: SHENG SIONG GROUP LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.49

SHENG SIONG GROUP 26 Apr 2012

PICKUP IN REVENUE AS EXPECTED - Strong pickup in revenue to continue in FY12 - Risk of Big 3 price competition remains but SSG to hold firm - Dividend and defensive play intact Sheng Siong Group's (SSG) 1Q12 results came in within expectations, with a 3.9% YoY (+15.1% QoQ) increase in revenue to S$159.8m while net profit rose 73.7% YoY (+348.9% QoQ) to S$16.8m. Excluding a one-time gain of S$10.5m from the sale of its old Marsiling warehouse and a S$1.6m prior-year tax provision, SSG's net profit actually fell 18.1% YoY (+111.6% QoQ) to S$7.9m. Going forward, with its retail space now exceeding 2010 levels, we expect SSG's revenue to continue growing. However, SSG could face some margin pressures from continued priced competition with other members of the Big 3 local supermarket chains although we expect SSG to hold firm given its strong consumer base, brand prominence and strategic store locations. Maintain HOLD with an unchanged fair value estimate of S$0.49.