8 things I learned from the 2023 Sheng Siong AGM

Sheng Siong Group is a supermarket retailer in Singapore, operating 67 stores throughout the country. Its chain stores offer a diverse range of shopping options, including fresh produce like seafood, meat, fruits, and vegetables, as well as packaged, frozen, and preserved food products. In addition to its Singapore stores, Sheng Siong expanded internationally by opening four stores in Kunming, China, starting from 2017, with a fifth store set to open this year.

Established in 1985, Sheng Siong has built a strong reputation for offering quality products at competitive prices. The company performed exceptionally well during the pandemic as its stores remained opened, providing essential goods for customers. I was curious to learn more about Sheng Siong’s past year’s performance and how it plans to continue growing post-pandemic.

Here are eight things I learned from the 2023 Sheng Siong AGM.

1. In FY2022, Sheng Siong achieved a revenue of S$1.3 billion as the Singapore economy gradually reopened. Although this figure was 2.2% lower than the revenue for FY2021, it still surpassed the S$1 billion mark for the third consecutive year. Gross profit margin and net profit margin experienced a slight increase, with a rise of 0.7 and 0.3 percentage points respectively, indicating efficient operations and an improved sales mix.

Source: Sheng Siong Group

2. The China subsidiary accounted for 2.6% of total revenue in FY2022. Notably, the revenue generated in China recorded a significant year-on-year growth of 23.5%. Three out of four stores operating in Kunming are currently profitable and self-sustaining. With China’s reopening and the shift away from its zero-COVID-19 policy, the company anticipates improved sales due to increased footfall.

3. Sheng Siong declared a final dividend of 3.07 cents per share, in addition to the interim dividend of 3.15 cents per share. The total dividend for FY2022 amounts to 6.22 cents per share, which represents a dividend payout ratio of 70.0% based on the company’s net profit after tax. Based on Sheng Siong’s share price (as of 10 May 2023), its dividend yield is 3.6%.

4. A shareholder wanted more detail about how the company improved its sales mix in FY2022. The CEO explained that the company aims to increase sales of certain product categories that generate higher margins. The two broad categories of products offered by the group are fresh and groceries, with the former typically commanding higher margins. Sheng Siong plans to shift its focus towards the fresh category as its seeks to replace the declining wet market industry in Singapore.

5. Another shareholder was interested to know more about the company’s future China expansion plans. The CEO said that the company is preparing to launch its fifth outlet in China, recognizing it as a significant market due to its vast population. The next phase involves the opening of more stores in Kunming, China. As Sheng Siong achieves better economies of scale, it intends to establish a distribution centre. By leveraging larger purchase volumes and streamlined handling processes, it can improve its operational margins in China.

6. A shareholder asked if the company was considering other markets for future expansion? The CEO said they currently have no plans to expand into new markets. Venturing into foreign markets requires more than just financial investments; it relies heavily on human capital and building a strong organizational culture. It took Sheng Siong six years to successfully open just four stores in Kunming, with a fifth one coming up. He added that the population in Southeast Asia, across multiple countries, totals around 680 million, while China alone boasts a population of 1.4 billion. Given this significant market size, the company is focused on expanding within China.

7. A shareholder asked about the company’s expansion plans in Singapore and whether the market was already saturated. The CEO expects Sheng Siong to continue growing in Singapore with the development of new HDB estates. The company typically aims to open two to three new stores in Singapore annually, but it has opened eight stores in a single year once. The estimated CapEx for each store ranges around S$1 million to S$1.2 million. The actual CapEx expenditure for a particular year will depend on the speed of expansion.

8. A shareholder asked about Sheng Siong’s F&B subsidiary and whether the company plans to expand it. The CEO clarified that Sheng Siong does not operate in the F&B industry. Instead, the founders of the company have a separate business venture in the food court industry, which is not part of the Sheng Siong Group’s operations. This business falls under the private holdings of the founders.

The fifth perspective

Sheng Siong has emerged from the pandemic as a stronger organization. While mindful of the uncertainty and challenges that lie ahead, the group Overall, Sheng Siong Group’s strong performance, strategic expansion plans, and commitment to quality and affordability position it well for continued success in the supermarket retail industry.

Liked our analysis of this AGM? Click here to view a complete list of AGMs we’ve attended »

Adam Wong

Adam Wong is the editor-in-chief of The Fifth Person and author of the national bestseller Lucky Bastard! which made the Sunday Times Top 10 Bestseller's List in 2009 and Value Investing Made Easy which made the Kinokuniya Business Bestseller's List in 2013. In 2010, he appeared on U.S. national television on the morning show The Balancing Act. An avid investor himself, Adam shares his personal thoughts and opinions as he journals his investing journey online.

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