<Results First Take> 1Q22 results in line; second highest quarterly profit recorded
- 1Q22 revenue and PATMI grows 6.1% and 14.1% y-o-y; in line with forecasts
- Gross margin eases -0.7ppt q-o-q but jumps +1.1ppt y-o-y to 28.7%; Seasonality to explain for q-o-q decline in gross margin
- 2 new stores to open in 1H22 that will bring store count to 66 by end-FY22
- Maintain BUY with a TP of S$1.76
| 1Q22 | 1Q21 | y-o-y change | 4Q21 | q-o-q change | |
| Revenue | 358.0 | 337.5 | 6.1% | 340.0 | 5.3% |
| Gross Profit | 102.7 | 93.1 | 10.4% | 99.8 | 2.9% |
| Operating Profit | 43.2 | 37.9 | 14.1% | 40.1 | 7.8% |
| GP Margin | 28.7% | 27.6% | 1.1ppt | 29.4% | -0.7ppt |
| Operating Margin | 12.1% | 11.2% | 0.9ppt | 11.8% | 0.3ppt |
| Dividend per share | nm | nm | nm | 3.10 | nm |
| Sales psf (annualized) | 2,483 | 2,348 | 5.8% | 2,381 | 4.3% |
| Retail Area (sq ft) | 576,640 | 574,957 | 0.3% | 571,150 | 1.0% |
| Store Count | 64 | 63 | 1.6% | 63 | 1.6% |
What’s New
Financials in line; 2nd highest quarterly profit recorded
- 1Q22 revenue grows 6% y-o-y to S$358.0m forming 27% of our full year forecast
- 1Q22 PATMI leaps 14% y-o-y to S$35.2m forming 28% of our full year forecast
- 1Q22 PATMI was Sheng Siong’s 2nd highest on record, with the highest quarter previously in 2Q20 as a result of Singapore’s circuit breaker
- Gross margin increased 1.1ppt y-o-y to 28.7% in 1Q22 but eased off from the record 29.4% notched in 4Q21
- 3 new store leases secured in 2021, 2 of which are expected to open in 1H22; targeting to grow store count by 3 – 5 stores per year
Our View
Strong 1Q22 results no surprise as Singapore saw record COVID-19 cases in February. Despite Singapore reopening and allowing 50% of workers to return to office from January 2022, surging COVID-19 cases between February and March meant more people stayed at home, boosting grocery demand. Going forward, we believe that demand normalization will happen but could take time with organic growth from higher store count mitigating the decline. Further upside for the company could also come in the form of changing consumer patterns, where consumers opt to eat at home as the cost of eating out rises.
Seasonality to explain q-o-q decline in gross margin. We believe sales promotions that were run during the festive season in 1Q22 (New Year, Chinese New Year) can partially explain the lower 1Q22 gross margin of 28.7%. Indeed, since FY17, gross margins in the first quarter have been lower than each of the next three quarters. This bodes well for Sheng Siong as it signals that the Group could continue its gross margin improvement in the coming quarters.
Maintain BUY with a TP of S$1.76.