Sheng Siong (SGX: OV8) continued to impress with its latest set of earnings for 2023.
The supermarket operator not only pulled off a better performance but also upped its dividends for the year.
With the group’s store count continuing to climb in both Singapore and China, investors can look forward to better numbers ahead.
Here are five highlights from Sheng Siong’s latest financial report.
1. A solid finish to the year
For 2023, Sheng Siong’s revenue increased by 2.1% year on year to S$1.37 billion.
The better revenue performance was contributed by six new stores that opened in 2022 and 2023.
Gross profit improved by 4.3% year on year as gross margin climbed to 30% from 29.4%.
Net profit inched up 0.3% year on year to S$134 million for the year.
The retailer generated a positive free cash flow of S$166.9 million, up 5.6% from the previous year’s S$158 million.
Sheng Siong continued to maintain a clean balance sheet with S$324.4 million of cash and no debt.
2. Gross margin continues to climb
Sheng Siong’s gross margin has been steadily climbing over the years.
This upward march is a testament to the group’s effective cost controls through bulk sourcing and efficient supply chain management.
Management also attributes the better gross margin to a favourable sales mix.
The supermarket operator has over 1,600 products under 23 house brands, and it is these house brands that command a better gross margin.
2020’s gross margin started at 27.4% and this has climbed without fail to 30% in 2023.
The second half of 2023 even sported a gross margin of 30.3%, the highest in the group’s history.
3. Expanding its presence in Singapore
Source: Sheng Siong’s 2023 Presentation Slides
A key driver of Sheng Siong’s top and bottom lines is its ability to grow its store count over the years.
From 2013 to 2023, the retailer managed to more than double its store count from 33 to 69.
Sheng Siong opened two stores in 2023 but the group aims to open at least three per year.
Its weighted average area has also been steadily rising, going from around 451,000 square feet in 2018 to 613,700 square feet in 2023.
4. A bright outlook
Management believes that the current high inflation and macroeconomic troubles may push people to tighten their belts and adopt cost-cutting measures.
Such measures include preparing home-cooked meals and patronising value-based supermarkets such as itself.
The Singapore government has also doled out special payments and CDC vouchers during Budget 2024 to help cushion the impact for households.
Such payments will help to boost Sheng Siong’s business.
On the store expansion front, Sheng Siong announced that it had secured another two shop spaces in early 2024.
These new stores are slated to open by the second quarter of 2024 and will increase its Singapore store count to 71.
Another six supermarket stores are projected to be put up for tender in the remainder of this year, thus offering ample opportunities for the group to bid for and secure more new sites.
Over in China, Sheng Siong’s five existing stores in Kunming are profitable.
A new lease agreement was signed in September last year with a sixth store slated to be operational before the end of the second quarter of this year.
5. Higher dividends declared
In line with the better financial performance, Sheng Siong declared a final dividend of S$0.032, higher than the S$0.0307 paid out last year.
Together with the interim dividend of S$0.0305, 2023’s total dividend came in at S$0.0625, slightly higher than 2022’s S$0.0622.
At the current share price, Sheng Siong’s shares sport a trailing dividend yield of 4.2%.
Get Smart: Growing steadily
Sheng Siong’s share price has been weak of late, tumbling around 8.5% in the past year to close at S$1.50.
This was just a tad higher than the group’s 52-week low of S$1.46.
However, the retailer has proven its resilience with its financial numbers and its slow but steady growth.
With more stores opening soon in the heartlands, investors can look forward to better days ahead for the supermarket operator.
We’ve just released a new Special FREE Report: “How to Make Your Child a Millionaire.” It’s a simple, no-nonsense guide for parents who care for their child’s financial future. You’ll also find 3 stocks (one even had a 55.8% jump in dividends) you can consider today to kickstart your child’s “piggy bank.” Click HERE to download now.
Disclosure: Royston Yang does not own shares in any of the companies mentioned.
