Wednesday, February 28, 2024

Sheng Siong Group FY2023 Earning Result

Sheng Siong Group ("SSG") reported their FY2023 earning result yesterday [here].  Here is a quick dive into the numbers:

Numbers in S$ million unless stated otherwise.
Twelve Months Ending 31 Dec 2023 31 Dec 2022 % Change
Revenue 1,367.72 1,339.46 2.1
Profit Before Tax 163.12 163.08 0.0
Net Profit 134.00 133.64 0.3
EPS (in cents) 8.89 8.87 0.2
DPS (in cents) 6.25 6.22 0.5

Revenue increased to S$1.37B (FY22: S$1.34), up 2.1% y/y, of which 2.5% is due to four new stores opened in 2022.  Sales of comparable stores remained the same.  SSG now operates five stores in China, of which revenue declined 0.1% y/y.  Gross profit margin improved to 30.0% (FY22: 29.4%) due to change in sales mix, offset by rising staff costs (up S$6.6M) and utility expenses (up S$13.8M).  Net profit margin remained steady at 10.1% (FY22: 10.0%).

Management believes escalating costs may compel consumers to adopt cost-cutting measures, such as choosing home-cooked meals, patronising value-driven supermarkets, and opting for more affordable house brand products.  Consumers who previously frequented upscale markets may now pivot towards budget-friendly supermarkets in an effort to manage their expenses.

SSG is expected to open two new stores in Singapore (at 91 Jalan Satu and Blk 471B Yishun Street 42) and one new store in Kunming, China during 2Q 2024.  Nonetheless, management warns that competition remains fierce in the supermarket industry.  Aggressive promotions coupled with higher input costs such as labour and energy expenses put pressure on margins.

SSG declared a final dividend of 3.2 cents per share, up from 3.07 cents per share a year ago.

My Thoughts:
SSG has always been one of my favourite stocks.  The business model is simple to understand; it has a stable (i.e. non-growing) shareholder base; the company heaps in lots of cash and has no debt; the management is disciplined in executing its strategy; and the profit margins have remained healthy through the years.  Best of all, the Board is willing to share the fruit of their success via an increase in dividend.  What's not to like about this company?  (Disclaimer: I shop at Sheng Siong every week.)  I wouldn't mind if the market still shuns this stock, keeping its price afloat around the $1.60 range.  It gives me opportunity to load up more of the shares.  Lots more.

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