Sheng Siong Group’s (SSG) 1Q17 results came in within our expectations. Revenue increased 4.1% YoY to S$217.1m and PATMI grew 4.4% to S$17.1m, meeting 26%-27% of our full year estimates.

Revenue was driven by new store growth of 6.2%, but this was offset by the Loyang store (only re-opened in late Feb) as well as flattish comparable same store sales. Gross profit margin improved from 24.5% to 25.0% due to higher rebates for bulk handling and promotions.

As the group recorded a relatively higher amount of government grants at S$2.3m in 1Q16 vs. S$0.9m in 1Q17, stripping out ‘other income’, core operating profit saw a decent 15.3% growth.

Completion of renovation for Block 506 Tampines Central is expected to complete by Jun-17, which will give a larger retail area of 25k sq ft from 9.8k sq ft. The closure of the store at The Verge is extended another month to 30 Jun-17 while the store in Woodlands is slated to close in Aug-17. Pending more information from the analyst briefing later, we maintain BUY with fair value estimate of S$1.15.

Source: OCBC Research - 2 May 2017