Sheng Siong Group Ltd (OV8)

Source: SSGL website

I decided to cover Sheng Siong Group Ltd ("SSGL") since I am considering it although there is not much action on the stock price. I used to patronize Sheng Siong as it was close to my workplace. After we shifted back to HQ, I forgot all about it until it's 2011 IPO which ACCICB was recommending a buy to his customers. 

I realized that it has been a while since I covered a local stock and I suspect my current followers are probably more interested in SSGL than say Pernod Ricard SA which I am also working on. Personally, we shop at NTUC and Cold Storage so I took a look at Dairy Farm International Holdings  Ltd ("DFIHL") which I should cover in a later post. SSGL is very well covered by analysts and local bloggers alike so here goes my take on SSGL. 

SSGL is ranked third in terms of number of supermarket outlets after rivals NTUC and Dairy Farm Group which owns supermarket chains like Giant, Cold Storage, Jasons Marketplace in Singapore. Online grocery shopping seems to have taken off and poses yet another challenge to physical brick and mortar stores. Personally if I can do without the delivery charges and have non perishable items stored in one of the 26 SingPost POPStations where I can self collect at any time, I bet that it would be a big hit as many homes are empty in the day when the delivery man comes around. 

SSGL was established in 1985, listed in 2011 and had no new stores opened since 2013. A new store is set to open in Penjuru area this month so sales should increase in the next earnings release. The general vibe I get is that this is a tough industry to be in given the market conditions and keen competition. I noted that this is a firm which has many family members involved in the business. I hope they practice an anti-nepotism policy as being a listed company means being accountable to shareholders, many of which are just normal salaried folk like you and me. 

Interestingly, there was a proposed joint venture with Kunming LuChen Group Co Ltd to operate supermarkets in China whereby SSGL will own 60% of the equity made me pause and rethink about investing in SSGL. China is not an easy market to enter and I have seen how some JVs turn sour for my ex clients even when their JV partner is the government! 

I do see why SSGL wants, and in a way needs to expand to foreign markets as there is only so much you can do in Singapore but at this point I am not all for this strategy as I am unsure how they can make this a success. But this is not set in stone as it is a non binding letter of intent. The recent issue of 120 million new shares created much fodder on the market and speculations abound as to whether this was done to replenish their war chest after their acquisition in Junction 9. 

Opinions were divided as to whether SSGL's move to acquire sites was a wise choice to secure their future or a stupid costly mistake that hurts shareholders. I warrant it a smart move as disruptions to the business in the form of store closures would affect the company negatively. At this juncture, I'm just watching the stock and may enter if it drops to 0.60 as my targeted exit is at 0.80.

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