Sheng Siong Group’s (SSG) 1H14 results came in slightly above expectations. 1H14 revenue came in at S$361.3m, forming 50.1% of our FY14 forecast when 1H is typically the weaker half-year; 1H14 net profit was S$23.6m, making up 53.9% of our FY14 forecast. In this quarter itself, 2Q14 revenue increased by 7.4% YoY to S$171.6m.

We noted this was achieved despite closure of the Chin Swee store for almost a month during the quarter for a total makeover and lack of new store opening. The contributions from new and comparable same store sales were 2.7% and 4.7% respectively.

Compared to revenue, 2Q14 net profit increased proportionally higher by 30.3% to S$11.1m. This is mainly due to cost savings derived from the distribution centre. Pending an analyst briefing later, we put our BUY rating with fair value estimate of S$0.68 under review.

Source: OCBC Research - 24 Jul 2014