Can Sheng Siong sustain profit growth amid the turbulent retail landscape?

Two of its stores are slated to close temporarily.

FY16 is going to be marked by steady growth for Sheng Siong Group (SSG), according to OCBC.

SSG is poised to benefit from the full year contribution from six stores opened during 2015 to 2016, as well as the four new stores slated to open for Q2 onwards.

This is also in consideration of a flattish growth expected for comparable same stores as well as temporary closure for Loyang Point (6k sqft store in Q2) and Tampines (9.8k sqft store in Q4). The latter two stores would re-open in 1Q17 with 8k sq ft and 25k sq ft.

“We revise our estimates for FY16 to take into account a higher ‘other income’ component, while our assumptions also account for the S$53m payment for the property at Upper Changi Road,” states the report.

“While SSG has signed a lease for their first store (~54k sq ft) in Kunming, China, slated to open in 4Q16 at a new shopping complex situated in a residential area, the investment risk is currently limited to US$6m,” the report further notes.