Sheng Siong Group’s (SSG) 4Q17 PATMI grew 9.3% YoY to S$16.8m, driven mainly by higher gross profit contributed by: 1) lower input costs on better buying prices, higher rebates and volume discounts from suppliers, and 2) an increase in revenue of 1.7% to S$200.3m.

4Q17 revenue was driven by new stores (+2.7%) and same store sales (+3.2%), but offset by a 4.2% YoY decline in revenue from temporary closure of Loyang Point store, as well as permanent closure of The Verge and Woodlands Block 6A stores.

On similar reasons to 4Q17, SSG’s FY17 revenue grew 4.2% YoY to S$829.9m, and gross profit margin improved slightly to 26.2%. Consequently, excluding tax refunds of S$2.2m recorded in 3Q17, SSG’s FY17 core PATMI were within our expectations as it rose 7.9% to S$67.6m, and formed 102% of our full year estimate.

The new store in Kunming, China commenced operation in Nov 17 in a limited manner as a number of the shops in the new shopping mall where the supermarket is situated have yet to open for business.

A final dividend of 1.75 S-cent was proposed for FY17 (FY16 final: 1.85 S-cent), bringing the total dividend for FY17 to 3.3 S-cents (FY16 total: 3.75 S-cents).

Pending an analyst briefing, we maintain BUY but put our FV under review.

Source: OCBC Research - 23 Feb 2018