Sheng Siong Group announced its 1Q2016 results on 27 April 2016. Revenue increased 5.1% year-on-year to $208.5 million while net profit increased 16.8% year-on year to $16.4 million. Given that many SGX stocks had been heavily sold down since the start of the year, Sheng Siong’ share price remains rock solid in the face of poor market sentiments.
Under the current challenging business climate and government’s restriction on foreign labor employment, Sheng Siong’s latest results are impressive as they reflect management’s ability to control cost and improve margins.
I continue to like Sheng Siong for its debt free status and strong cash position. The group currently has cash pile of $113.9 million and operating cash flow remains healthy at positive $5.23 million, which is significantly lower than previous year of $12.8 million. This is because of the acquisition of property, plant and machinery.
In terms of growth expansion, the group is opening 4 new stores in 2Q2016. In addition, Sheng Siong had exercised the option to purchase premises at Block 209 New Upper Changi Road, for consideration of $53 million. I am pretty excited about this project because the traffic at Bedok interchange is very high, thus this store is very likely to increase revenue substantially for Sheng Siong.
To expand its overseas outreach, Sheng Siong is using China as its first test bed. The subsidiary in Kunming has signed a lease for the first store to be opened in 4Q2016. This calibrated approach is not surprising given the conservative style of the management, which typically focuses on managing costs and nurturing growth of new stores in Singapore.
Sheng Siong’ share price is on an upward trend and is steadily marching on to the $1.00 level. This is definitely a growth stock with strong potential and solid fundamentals. Since it launched its IPO in 2011, the group has been giving out consistent dividends. Total dividends given out stand at $0.129. If you had bought during the IPO at price of $0.33, you would have made at least 300% profits (including the dividend payouts)! An explosive return for a 5 year investment!
Not vested in this counter but is monitoring the development of this very interesting local enterprise!
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SG Wealth Builder
SG Wealth Builder