Sheng Siong Group‟s (SSG) 3Q15 results met our expectations, as revenue grew 7.3% YoY to ~S$200m, making up 25.9% of our FY15 forecast. Net profit also increased 18.7% to S$14.5m, constituting 26.8% of FY15F. The group‟s new stores contributed 6.2% to its revenue growth, while 1.1% came from old stores.

SSG managed to keep its gross profit margin steady at 24.3% vs. 24.2% in 3Q14, while on a quarterly basis, this was lower than the 25.2% seen in 2Q15 due to seasonality effect, slightly lower selling prices and higher input prices.

We like that another lease was signed with HDB for a new store of ~4.3k sq ft at Dawson Road, Singapore, which is expected to be operational in Nov-15. The group‟s balance sheet remained healthy with net cash of S$126m. Maintain BUY with fair value estimate of S$0.95.

Source: OCBC Research - 23 Oct 2015