Can Sheng Siong's share price keep climbing after hitting an all-time high?
SINGAPORE: The share price of Singapore's supermarket chain Sheng Siong has climbed over 13% year-to-date, recently hitting a record high of S$1.86, according to The Smart Investor. With plans to open more stores across the city-state, can it keep going?
In the first quarter of 2025 (Q1 2025), the supermarket chain posted a 7.1% year-on-year (YoY) rise in revenue to S$403 million. Gross profit climbed 10.2% YoY to S$122 million, supported by festive sales during Hari Raya and eight new stores opened last year. Other income also rose 18.1% YoY due to higher rental income from shop spaces and government grants. Meanwhile, net profit rose 6.1% YoY to S$38.5 million.
While free cash flow stood at S$22.9 million, lower than the previous year's S$34.5 million, Sheng Siong's gross margin rose steadily from 28.7% in 2021 to 30.5% in 2024. In Q1 2025, its gross margin stood at 30.3%, up from 29.4% in the previous year.
In addition, Sheng Siong's consistent cash flow allowed it to maintain regular dividends, with a slight increase to S$0.064 per share for 2024, up from S$0.0625 in 2023. The supermarket chain's payout ratio was 70%, suggesting 30% of its profits went to reinvesting.
In terms of growth, the supermarket chain's store count reached 77 by the end of March 2025. Its retail area has also expanded, reaching a record 672,200 square feet, up from 661,500 square feet.
Last year, Sheng Siong opened six stores, followed by another two in Q1 2025. With a target to open at least three new stores annually, Sheng Siong has already exceeded its goal for 2024, and 2025 may see even more store openings.
Management said it had secured six more locations, which are expected to open by the third quarter of 2025 (Q3 2025). These include sites in Punggol and Tengah, as well as two private retail locations at KINEX Mall and Cathay Building. By then, Sheng Siong will have opened eight stores this year.
The group is also waiting for four more HDB site tenders.
New and comparable new stores contributed 6.3% to Q1 2025 revenue, while comparable same-store sales only contributed 0.1% to this growth, indicating that the company's expansion strategy is key to boosting its revenue.
So, can Sheng Siong's share price continue to go up?
While management of the supermarket chain noted that macroeconomic uncertainties could lower consumer spending on non-essential goods, the shift towards value-based supermarkets could work in the supermarket chain's favour.
Intense competition in the supermarket sector also remains a challenge. Management has cautioned that aggressive promotions and rising operating costs could pressure the supermarket's margins in the near term. Despite these, Sheng Siong's store expansion strategy is progressing well, and the retailer is on track for continued revenue growth in the coming quarters.
The Smart Investor urged investors to keep an eye on operating costs and cash flow to assess any potential impact on business profitability. /TISG
Read also: Sheng Siong CEO Lim Hock Chee's FY2024 pay rises 20.6% to S$7.06M on bigger bonus
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