Due to a delay in approval from HDB, the sale of Sheng Shiong Group’s (SSG) old Marsiling warehouse facility will now be included in FY12’s figures instead of FY11. In addition, the gain was revised downwards to S$10.44m upon incorporation of a levy fee to HDB. With these new developments, we reverse our previous increases to FY11 earnings, returning to a net profit of S$31m and raising FY12’s net profit correspondingly to S$43.3m from S$34.2m previously. As SSG’s share price is currently supported by expectations of a healthy dividend payout, we could see some selling pressure on the counter once its FY11 results are released and the lower earnings is confirmed. However, we continue to like SSG for its strong fundamentals, healthy balance sheet and relatively inelastic domestic consumption demand, and the counter will provide some downside protection should a market correction occur. Maintain HOLD at an unchanged fair value estimate of S$0.44.
Strong price ascent since start of the year. Since our last issued report on 21 Dec last year, Sheng Shiong Group’s (SSG) share price has climbed more than 13% to consolidate around its current price of S$0.50. While the improving macro-environment has certainly helped – increasing market correlation of equities has resulted in broad market gains – we deem its strong price support to be derived from expectations of a healthy dividend payout (management committed 90% of net profit) upon the announcement of its FY11 results. While this optimism is supporting prices at the moment, we could see some selling pressure on the counter once its results and dividend amount are released as we anticipate some disappointments.
Proceeds from Marsiling warehouse sale now included in FY12 earnings. Previously, we had mentioned that the sale of SSG’s old Marsiling warehouse facility for a one-time gain of S$11.3m would be included in FY11’s earnings. However, due to a delay in approval from HDB, the sale will now be included in FY12’s figures instead. In addition, the gain was revised downwards to S$10.44m upon incorporation of a levy fee to HDB. With these new developments, we reverse our previous increases to FY11 earnings, returning to a net profit of S$31m and raising FY12’s net profit correspondingly to S$43.3m from S$34.2m previously.
Still a quality defensive play; maintain HOLD. With management’s commitment to pay out 90% of FY11’s net earnings as dividends, SSG’s dividend per share should come in at around 2 cents for a dividend yield of 4%. While the expected downward revision of figures may disappoint some investors, we continue to like SSG for its strong fundamentals, healthy balance sheet and relatively inelastic domestic consumption demand, and the counter will provide some downside protection should a market correction occur. Maintain HOLD at an unchanged fair value estimate of S$0.44.
Proceeds from Marsiling warehouse sale now included in FY12 earnings. Previously, we had mentioned that the sale of SSG’s old Marsiling warehouse facility for a one-time gain of S$11.3m would be included in FY11’s earnings. However, due to a delay in approval from HDB, the sale will now be included in FY12’s figures instead. In addition, the gain was revised downwards to S$10.44m upon incorporation of a levy fee to HDB. With these new developments, we reverse our previous increases to FY11 earnings, returning to a net profit of S$31m and raising FY12’s net profit correspondingly to S$43.3m from S$34.2m previously.
Still a quality defensive play; maintain HOLD. With management’s commitment to pay out 90% of FY11’s net earnings as dividends, SSG’s dividend per share should come in at around 2 cents for a dividend yield of 4%. While the expected downward revision of figures may disappoint some investors, we continue to like SSG for its strong fundamentals, healthy balance sheet and relatively inelastic domestic consumption demand, and the counter will provide some downside protection should a market correction occur. Maintain HOLD at an unchanged fair value estimate of S$0.44.
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