Sheng Siong - DBS Research 2023-05-03: No Surprises Here; Wait For Better Entry Points

• Sheng Siong (SGX:OV8) reported its 1Q23 results, with revenue down 0.4% and net profit down 5.3% y-o-y to S$356.5 and S$33.2m, respectively. Sales of same stores fell by 3.6% y-o-y, offset by new store contribution of 3.6% to 1Q23 revenue. Meanwhile, sales from China operations fell by 0.4% y-o-y.
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• Administrative expenses increased by S$3.9m y-o-y (equivalent to 6.5% y-o-y), of which S$1.5m was due to higher staff cost and S$2.1m due to higher utility expenses. The higher utility expenses are within our expectations given previous indications of its higher electricity tariffs by management of Sheng Siong. As a % of sales, administrative expenses grew from 16.6% to 17.7%, adversely impacting operating margin.
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• Sheng Siong continues to build up its war chest with cash balance to a high of S$283.1m. Sheng Siong continues to be cash flow generative, adding S$7.6m to its war chest in 1Q23.

Our views on Sheng Siong

Results in line with expectations and on-track to meet FY23 estimates.

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Andy SIM CFA DBS Group Research | Zheng Feng CHEE DBS Research | https://www.dbs.com/insightsdirect/ 2023-05-03 SGinvestors.io

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