E-commerce boost still not on the cards for booming Sheng Siong

New stores will drive growth in 2015.

Sheng Siong is a long way away from cashing in on the e-commerce boom. According to OCBC, Sheng Siong’s plans to tap into e-commerce as well as expand its presence in China will take time and thus cannot be considered catalysts in the near term.

OCBC notes that Sheng Siong will bet on new stores to drive growth next year. The group now has thirty-four stores in Singapore, the newest of which is located in the Penjuru area and commenced operations just in the fourth quarter.

“Store expansion in Singapore will remain as SSG’s key growth driver. By holding a significant cash balance, SSG has to show that they are readily capturing opportunities to ensure its business continue to generate steady sales growth in the coming years,” noted OCBC.

Here’s more from OCBC:
SSG also met with a delay in relation to its acquisition of Block 506 Tampines Central 1 due to regulatory approvals, but it will likely follow through thus we factor the associated capex of S$65m into our assumptions.

Some upside could be seen if management succeeds in its push to open this new store (~9.8k sq ft) before Chinese New Year in 2015 to reap the benefits of higher sales during the festive season.

We keep in mind that the remaining ~26.2k sq ft of retail space suggests any meaningful expansion could eventually translate to higher revenue contribution from the Tampines store.

We would like to highlight that the eight new stores added in 2012 could be reaching normalised growth rates. Looking ahead, in view of the expected closure for its ~42k sq ft Woodlands store by 2Q17, we highlight the importance of store expansion in the next two years for SSG.