- Keep BUY rating on Sheng Siong (SGX:OV8), with new S$1.96 target price from S$1.99, 25% upside from the current Sheng Siong's share price. We remain upbeat on Sheng Siong with growth fuelled by new outlet wins and better consumption on higher purchasing power from the Budget 2024 announcement.
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- Valuation at -1 standard deviation (~17x) from its historical mean forward P/E (~19x) is attractive. The stock is also supported by ~4% FY24F yield.
In-line FY23 earnings.
- Sheng Siong's revenue and earnings of S$1.4bn (+2% y-o-y) and S$134m (0% y-o-y) were within expectations. New stores have continued to lead growth, with revenue growth driven by six new stores (opened in FY22- 23) at +2.5% y-o-y. SSSG was flat. Annualised sales/sq ft was S$2,231 (-1.4% y-o-y), i.e. slightly below last year’s S$2,262.
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- A final S$0.032 dividend was declared, bringing full-year dividends to S$0.0625, with the dividend payout ratio amounting to ~70%. See Sheng Siong's dividend dates.
- As there were no surprises for FY23, we have kept our FY24F-25F earnings largely unchanged.
We expect growth to be led by new stores.
- Read more at SGinvestors.io.
