Sheng Siong Group’s net profit jumped 20.8% to S$8.5m

Minimal impact from interim pressures.

According to OCBC Investment Research, Sheng Siong Group’s 2Q13 results came in within expectations. 

Revenue increased 8.7% YoY to S$159.8m on the back of contributions from new stores while gross profit and operating margins improved YoY for the third straight quarter to 23.2% and 6.4%respectively (+1.3 ppt and +0.7 ppt each). Net profit increased 20.8% YoY to S$8.5m.

An interim dividend of 1.2 S cents was also declared (versus 1.0 S cent last year).

Here's more from OCBC:

Interim pressures not a concern. The group encountered slight declines in same store sales during the quarter as a result of ongoing renovation/construction works and lower contributions from stores located in matured estates.

While some areas will continue to be affected till at least FY15, we expect the impact to be minimal and be offset by the full-year contribution from the eight new stores opened last year.

Cost pressures will be managed. With the group utilizing variable pay components with revenue targets for a proportion of staff compensation, it is not surprising to see the pace of opex increases in-line with top-line growth thus far. For 2H13, we expect this trend to continue.

Maintain BUY but forecasts tweaked. We lower our FY13 revenue growth to 9.5% from 12% previously as SSG has yet to add any new stores following keen competition for retail space.

However, our margin forecasts remain the same as we maintain our view that the competitive landscape amongst the big 3 supermarkets will remain benign without any escalation.

In addition, the operating environment remains conducive for the group with resilient supermarket expenditure and lower inflation expectations.