UOB Kay Hian Private Limited
Date of Report: Friday, 01 August 2025

Sheng Siong Group Delivers Robust Q2 2025 Results: Earnings, Expansion, and Strategic Growth Drive Target Price Upgrade

Strong Performance Anchored by Margin Expansion and New Store Growth

Sheng Siong Group (SSG), Singapore’s third-largest supermarket operator, continues to showcase its resilience and growth ambitions, reporting steady earnings and an accelerated network expansion for the second quarter of 2025. The Group’s Q2 2025 net profit attributable to shareholders (PATMI) reached S\$34 million, marking a 0.5% year-on-year increase and aligning closely with analyst expectations. This performance brings 1H25 revenue and PATMI to 49% and 48% of full-year forecasts, respectively.

Key Highlights from 2Q25 Financial Results

• Revenue: S\$361.7 million (+7.0% YoY)
• Gross Profit: S\$113.6 million (+8.9% YoY)
• Gross Margin: 31.4% (record high, up 0.5 percentage points YoY)
• PATMI: S\$33.8 million (+0.5% YoY)
• PATMI Margin: 9.3% (down from 10.0% YoY, as higher staff costs offset gross margin gains)
• Interim Dividend: 3.2 Singapore cents per share (unchanged YoY)

Operational Drivers and Expansion Plans

Top-line growth was fueled by contributions from 11 new stores opened across 1H25 and 2024. The Group achieved a record gross margin of 31.4%, primarily attributed to a richer sales mix focusing on higher-margin fresh produce. While PATMI growth was moderate due to a 15% YoY increase in selling and distribution expenses—reflecting higher staffing needs from new outlets—SSG’s robust free cash flow generation of S\$51 million (+5% YoY) and a cash position of S\$367 million as of end-2Q25 provide significant financial flexibility for continued expansion.

SSG is on pace to open at least eight new stores in 2025, closely approaching its record of 10 new stores set in 2018. As of end-2Q25, the company’s total Singapore retail footprint increased 11% YoY to 705,523 square feet across 80 outlets.

China Operations: Growth Continues Amidst Challenges

Revenue from China operations improved by approximately 15% YoY to S\$9 million in 2Q25, though it was down 17% compared to the previous quarter. The segment remains loss-making, pressured by higher operating expenses from the sixth store opened in 2024. Management remains focused on enhancing brand visibility in Kunming but continues to face competition from informal retail channels such as street hawkers and wet markets.

Financial Performance Table

Store Expansion: Near-Record Openings and Strategic Focus

• Three new stores were opened in 2Q25, totaling five for 1H25.
• With two additional stores opened in July and another set for 3Q25, SSG is on track for nine new store openings in 2025—just one short of its 2018 record.
• The company’s expansion strategy remains focused on regions in Singapore where it has limited presence, with three tenders pending and another three HDB sites expected for tender by June 2026.

Impact of Government Vouchers on Supermarket Sales

Supermarket sales in Singapore surged 7.8% YoY in May 2025, buoyed by government-issued CDC vouchers (S\$500 per household, including S\$250 for supermarkets) and SG60 vouchers (S\$600 for every Singaporean aged 21+, with an extra S\$200 for those aged 60+). While these measures have supported overall supermarket sales, the incremental benefit to SSG may be limited, as vouchers may substitute regular cash spending and prompt purchases of premium-category items less aligned with SSG’s value-focused range. Nonetheless, SSG’s tailored SG60 promotions and purchase-with-purchase discounts have successfully captured voucher-driven traffic.

Valuation, Recommendation, and Key Catalysts

• BUY recommendation maintained.
• Target price raised by 22% to S\$2.40 (from S\$1.97), based on a higher PE multiple of 23x (previously 20x), reflecting a premium to historical averages but a slight discount to peers.
• No changes to earnings forecasts.
• Key catalysts: Higher-than-expected new store openings, stronger same-store sales, and increased demand from inflationary pressures and GST hike.

Peer Comparison Table

Conclusion: Defensive Strength and Visible Growth Pipeline

Sheng Siong Group’s Q2 2025 results reaffirm its position as a defensive, growth-oriented supermarket operator with resilient margins and a robust balance sheet. The Group’s strategic expansion in underpenetrated areas, prudent cost management, and ability to capture government-stimulated demand provide strong visibility for continued market share gains. The upgraded target price reflects confidence in SSG’s ability to sustain earnings growth and expand its retail footprint in a competitive landscape.

About Sheng Siong Group

• Sector: Consumer Staples
• Singapore’s third-largest supermarket operator by market share
• Market Cap: S\$3.16 billion (US\$2.44 billion)
• Shares Outstanding: 1,503.5 million
• Major Shareholders: Sheng Siong Holdings (29.9%), Lim Hock Chee (8.0%), Lim Hock Eng (7.9%)
• 52-week price range: S\$2.23/S\$1.49