CGS International

April 17, 2025

Sheng Siong Group: A Deep Dive into Growth Strategies and Market Positioning

Sheng Siong Group: A Secret Shopper’s Perspective

• Ground checks reveal decent customer footfall with full checkout counters during peak hours. [[1]]
• Estimated 1Q25F revenue growth of approximately 3% year-over-year, surpassing the industry’s 0.4% decline in 2M25. [[1]]
• 1Q25F net profit is expected to remain flat year-over-year due to elevated SG&A expenses. [[1]]
• SSG is poised to capitalize on its value-for-money proposition as consumers shift towards high-margin fresh and house-branded products. [[1]]
• Reiterate Add rating with an unchanged Target Price (TP) of S\$1.90, based on 19x 2026F P/E, approximately 0.5 standard deviations below the 5-year mean. [[1]]

Tech-Enabled Store Formats Mitigating Rising Staff Costs

• Ground checks across 15 SSG stores (20% of the network) indicated strong customer traffic. [[1]]
• Newer stores exhibit a 79:21 ratio of self-checkout to manned checkout counters, contrasting with a 36:64 split in older stores. [[1]]
• Maintained fast checkout speeds, even during peak hours, reflecting effective automation and customer acceptance. [[1]]
• Between 2022 and 2024, SSG added 11 stores; depreciation as a percentage of revenue increased by only 0.2% compared to a 1.1% increase in staff costs. [[1]]
• Greater self-checkout usage could facilitate targeted customer promotions. [[1]]

1Q25F: Revenue Growth Fueled by Store Expansion; Profits Likely Flat Year-Over-Year

• Estimated revenue growth of approximately 3% year-over-year, exceeding the supermarket and hypermarket sales index’s 0.4% decline in 2M25. [[1]]
• Growth primarily driven by an increase of 7 stores since 1Q24. [[1]]
• SSG has outperformed industry growth by 2-5% over the past eight quarters. [[1]]
• Anticipate a flat year-over-year net profit of approximately S\$36 million due to higher SG&A and gradual revenue ramp-up for new stores opened in January and February 2025. [[1]]
• SSG is awaiting results for eight store tenders and plans to open five new stores in FY25F. [[1]]
• 1Q25 results are scheduled for release on April 29, 2025. [[1]]

Margin Tailwinds from Downtrading

• The Ministry of Trade and Industry downgraded Singapore’s 2025 GDP growth forecast to 0-2%. [[1]]
• Expect accelerated customer downtrading to benefit SSG’s value-for-money positioning. [[1]]
• Shift towards higher-margin fresh products (40-50% of FY24 sales) and house brands (8%). [[1]]
• SSG allocates approximately 28% of store space to fresh goods and launched over 100 new house-branded SKUs in the past year. [[1]]

Defensive Play with Earnings Visibility; Reiterate Add

• Reiterate Add rating based on SSG’s strong operational track record and potential for net profit growth through new store openings. [[1]]
• Potential re-rating catalysts include an increase in HDB new store tenders. [[1]]
• Downside risks include tight supply of frontline service personnel, increasing staff costs, and margin erosion from heightened competition. [[1]]

Key Data Points

• Current Price: S\$1.67 [[1]]
• Target Price: S\$1.90 [[1]]
• Previous Target: S\$1.90 [[1]]
• Up/downside: 13.8% [[1]]
• Market Cap: US\$1,910m (S\$2,511m) [[1]]
• Average Daily Turnover: US\$1.85m (S\$2.51m) [[1]]
• Current Shares o/s: 1,504m [[1]]
• Free Float: 42.6% [[1]]

Key Financials

Detailed Store Visit Analysis

• Visited 15 Sheng Siong stores between April 9-16, 2025. [[2]]
• Nine older outlets (pre-2024) and six newer outlets were assessed. [[2]]
• Approximately 28% of store space allocated to fresh products, a high-margin category. [[2]]
• Newer outlets featured brighter lighting, wider aisles, and a more premium ambiance. [[2]]
• Most locations had decent customer traffic and fast-moving checkout lines. [[2]]
• One recently opened store showed noticeably lower footfall, suggesting it’s still in the ramp-up phase. [[2]]
• All six new stores had self-checkout counters, compared to five of the nine older stores. [[2]]
• One new store operated with approximately 50% fewer staff than a similar-sized older store relying only on manned checkouts. [[2]]
• Between 2022 and 2024, SSG added 11 new stores. [[2]]
• Staff costs as a percentage of revenue increased by 1.1% to 15.4%, while depreciation expenses rose marginally by 0.2% to 4.1%. [[2]]
• Self-checkout systems have a modest capital cost compared to potential labor cost savings. [[2]]
• Increased adoption of self-checkout could help contain rising staff costs and support operating margins. [[2]]

Store Visit Data

Margin Tailwinds from Downtrading

• Ministry of Trade and Industry downgraded Singapore’s 2025 GDP growth forecast to 0-2%. [[4]]
• Monetary Authority of Singapore cautioned about spillover risks from a global trade downturn. [[4]]
• Expect accelerated customer downtrading to benefit SSG’s value-for-money positioning. [[4]]
• Shift towards higher-margin fresh products (40-50% of SSG’s sales as of FY24) and house brands (8%). [[4]]
• SSG launched over 100 new house-branded SKUs in the past year, totaling 1,750 as of April 4, 2025. [[4]]
• Special promotions are boosting house brand visibility. [[4]]
• Customers actively identified and expressed preference for house brand products, citing lower prices and ongoing deals. [[4]]

Peer Comparison

ESG Initiatives

• Market share gain over the past four years indicates success in consumer satisfaction, affordability, and product quality. [[6]]
• Emphasis on employee wellbeing reflects good social practices. [[6]]
• Diversifying product sourcing to ensure supply chain resiliency. [[6]]
• Working with local partners and suppliers to promote local produce. [[6]]
• Supporting “made in Singapore” products. [[6]]
• Focus on food security. [[6]]
• Ensuring product range is affordable and of high quality. [[6]]
• Implemented a 1% counter inflation discount on all in-store purchases from January to March 2024. [[6]]
• Offered a 4% special discount for senior citizens, extended to December 31, 2025. [[6]]
• Focus on customer experience as a key driver for market share gains. [[6]]
• All 75 Sheng Siong stores in Singapore have been fully fitted with LED lights, potentially reducing lighting energy consumption by up to 80%. [[6]]