• Sheng Siong Group’s 2Q18 results in line, growth driven by SSSG and new stores.
• Interim DPS of 1.65 Scts declared.
• New stores, better operating efficiencies and margins will drive growth.
• Maintain BUY, Target Price at S$1.26 on 25x FY19F PE.

Maintain BUY and Target Price S$1.26 on Ongoing Growth Momentum

We maintain our BUY rating for Sheng Siong as growth is driven by more stores, improving efficiencies and margins. Gross margins have continued to strengthen with more supplier rebates and lower costs. We see this improving further when its warehouse expansion is operational in FY19F.

Near term outlook for new HDB supermarkets is robust with at least 7 outlets up for tender in the next six months.

Same store sales growth (SSSG) and sales per square feet matrices also remain strong. Dividend yield is decent at 3-3.5% with potential scope for a higher payout.

Source: DBS Research - 31 Jul 2018