! Hi everyone! I will just give some stats here that might be relevant for the members. Business Profile ! Source: Singapore Business Review Most of us are similar with this supermarket chain that is usually nestled in the heartlands. As of now, they have more than 50 outlets, as compared to the 24 outlets that they had when they first listed on the SGX in 2011. Sheng Siong is most likely well known for it's more "wet market" setting as compared to other grocery chains like NTUC Fairprice, and appeals more to the older generation in Singapore. It recently ventured into China too. ! Source: Singapore Business Review ! Based on FY18's results Income Statement ! Source: Sheng Siong Group Annual Report 2018 Both Sheng Siong's top line and bottom line have grown over the past few years. With a CAGR of 6.2% from 2011 to 2017 for its revenue. In 2018, a portion of revenue growth could also be attributed to the growth in the Chinese market as well. Profitability have also improved, with the different profitability margins, such as gross profit and net profit, improving significantly. The opening of new stores have hampered such growth a little due to the increase in admin and staff costs. Balance Sheet Strength Compared to other firms, I do believe that their liquidity term liquidity is not as strong. However, the nature of their business do requires them to hold more inventory, so Sheng Siong isn't an exception. The company seems to have paid off all their debt as well. Cashflows The company seems to be quite a cash generating machine, as others have mentioned. This is evidenced by their high free cashflow, as well as free cashflow to equity. Despite having high capital expenditures, the firm is more than able to account for such cash outflows. Working Capital Management Sheng Siong's working capital management seems quite strong, with a negative cash conversion cycle. This is supported by Sheng Siong's trade payable days of more than 60, while having much shorter receivable days of 5-6 and a inventory cycle of 30 over days. This means that Sheng Siong has more cash to operate with based on their working capital management because they can delay payment to their suppliers. The short receivable days should not come as too much of a surprise though, since their B2C grocery store model requires payment from customers upon selling of the items. Valuation DBS forward P/E ratio for 2019 was 25X, slightly lesser than their projected regional average of 26X. If you were to compare Sheng Siong to their regional peers like that, it seems that Sheng Siong is valued at the right price. However, this slightly higher valuation may not be warranted because their growth rates may not be able to be sustained over time, since the Singapore market for groceries is already becoming increasingly saturated. I am particularly worried about the high P/B ratio that they have. Given that the business might have trouble growing earnings over time, I think that such valuation isn't quite justified. Risks ! Source: Intelligence Nodes I think that Sheng Siong faces similar risks to the disruption that faces other retail businesses in Singapore. Firstly, there has been large speculation on how e-commerce will disrupt traditional grocery purchases in Singapore, especially with players like Red Mart. One silver lining for Sheng Siong is that they have traditionally served the older generation, who may be less tech savvy. Another bigger risk that they face is the saturation of the Singapore grocery space. Since Singapore has an aging population and slow population growth, increasing the market size of this industry would be quite tough. For players like Sheng Siong to grow and compete, they probably need to adapt to newer trends and innovate, or expand into other international markets as they already did. But with such moves comes great risk as well. Sheng Siong may also have to change its strategy of continually opening new stores, and focus on increasing same store sales. (SSTS) Share Price Performance ! Source: Yahoo Finance Relative to the STI, Sheng Siong's stocks had performed better. This is probably due to the positive earnings resulst that were released throughout the year, and the strong fundamentals that I believe Sheng Siong possesses. In contrast, so far in 2019, the STI had actually outperformed Sheng Siong. For the past 5 years, Sheng Siong has actually made a share price return of almost 70%! This is reflective of the strong growth that the firm has achieved over the years. Currently, the firm is trading at 89% of their Last Twelve Month's high.