CGS International Securities Singapore Pte. Ltd.
Date of Report: July 30, 2025

Sheng Siong Group Powers Ahead: In-Line Earnings, Aggressive Store Expansion, and Regional Retail Peer Analysis

Sheng Siong Group’s 2Q25 Performance: Solid Growth, Expansion on Track

Sheng Siong Group (SSG), one of Singapore’s leading grocery retailers, delivered a robust set of results for 2Q25, staying firmly on its growth trajectory. The company reported revenue of S\$361.7 million, marking a 7% year-on-year increase. Profit after tax and minority interests (PATMI) was S\$33.8 million, up 0.5% year-on-year, both in line with company and consensus expectations.

• Gross margin rose by 50 basis points to 31.4% in 2Q25, driven by an improved sales mix.
• Net margin declined by 60 basis points, primarily due to higher staff and overhead costs associated with opening new stores, and a dip in financing income.
• Comparable same-store sales remained flat year-on-year, with growth coming from new outlets.
• Interim dividend is unchanged at 3.20 Singapore cents per share, translating to an annualized dividend yield of 3%.

Store Expansion: Aggressive Rollout and Pipeline

Store network expansion is a key driver of SSG’s growth. The first half of 2025 saw the opening of 7 new stores, with another scheduled for 3Q25. The company is actively participating in tenders, with 3 more units pending award.

• Recent openings in 2Q25 include Blk 240 Tengah Garden Walk, Blk 218 Sumang Walk, and KINEX mall. Two additional Punggol units opened in July 2025.
• Singapore’s HDB has added a supermarket unit at Block 623 Elias Road for tender from July 29 to August 26, 2025.
• Looking ahead, HDB plans to tender three more supermarket units (5,400–9,700 sq ft) in 2026, with SSG expected to participate.
• SSG is forecasted to open 10 new stores in FY25 and 5 in FY26, reflecting a pace comparable to its banner 2018 expansion year.

Financial Highlights: Consistent Growth and Strong Balance Sheet

• Free cash flow to equity is projected to rise from S\$164.6 million in 2024 to S\$230.9 million by 2027.
• Return on equity (ROE) is estimated at 25.6% in 2025, gradually easing to 24.8% by 2027.
• Net cash per share will increase from S\$0.24 to S\$0.32 over the forecast period.

Valuation and Outlook: Positive Momentum Amid Risks

• The stock is rated “Add” with a target price of S\$2.21, representing a 3.8% upside from the current price of S\$2.13.
• Valuation is based on 22x 2026F P/E, one standard deviation above the 2017–2019 forward P/E average, justified by the aggressive store rollout.
• Re-rating catalysts include increased HDB store tenders and potential government wage support. Risks include higher frontline staff costs and heightened price competition.
• Consensus ratings: 7 Buys, 1 Hold, 0 Sells.

Peer Comparison: Regional Retailers in Focus

Sheng Siong’s price-to-earnings valuation is above the regional average, reflecting its defensive growth profile, strong margins, and superior return on equity among Singapore grocers. Its dividend yield of 3.1% is also attractive relative to peers.

Regional Grocery Retail Peer Group Highlights

• Singapore peers: Simple average P/E of 20.1x (CY25F), with ROE averaging 60.2% and dividend yield 9.4%.
• Hong Kong/China retail: Higher P/Es and broad range of returns, with Chow Tai Fook Jewellery and Sun Art Retail Group notable for high ROEs and yields.
• Malaysia: Lower P/E averages (16.8x), with 7-Eleven Malaysia and Aeon as leading players.
• Indonesia: Puregold and Robinsons Retail (Philippines) trade at much lower P/Es (9.7x), reflecting different growth dynamics.
• Thailand: CP All and Berli Jucker lead with P/Es in the mid-teens and double-digit ROEs.

Key Ratios and Operational Metrics for Sheng Siong

• Operating EBITDA margin: Projected to improve from 13.9% in 2024 to 15.1% in 2027.
• Revenue growth: Forecast at 6.14% in 2025, moderating to 3.75% in 2027.
• Net cash per share: Rises to S\$0.32 by 2027.
• Inventory days: Stable at around 34–35 days.
• Accounts receivable days: Improving to below 6 days.
• Dividend payout ratio: Maintained at 70%+ across the forecast period.

Shareholder Structure and Price Performance

• Market capitalization: US\$2.48 billion (S\$3.20 billion).
• Major shareholders: SS Holdings (29.9%), Lim Hock Chee (9.2%), Lim Hock Leng (9.1%).
• Free float: 42.6%.
• 1M/3M/12M price performance: +13.9%, +21.0%, +38.3% respectively.
• Outperformed the SIMSCI index in the latest quarter.

Conclusion: Investment Case and Outlook

Sheng Siong Group remains a top pick for investors seeking stable growth, attractive dividends, and defensive exposure in Singapore’s grocery sector. With a strong track record, visible store pipeline, and prudent financial management, SSG is well-placed to capitalize on continued urbanization and public housing growth. While staff cost inflation and competitive intensity remain key risks, the company’s operational strength and proactive expansion strategy underpin its positive outlook.

CGS International maintains its “Add” recommendation, with further updates to follow after the upcoming analyst briefing for more insights into operational trends and near-term drivers.