Rampant Sheng Siong share price on magical form

Crisis? What crisis? In a year in which numerous SGX blue chips retreated to multi-year lows, Sheng Siong share price defied gravity and went on a rampant bullish form. The surprise form of Sheng Siong share price confounded many critics, including myself. How did the management achieve such feat against the backdrop of market correction?

Since IPO price of $0.33 in 2011, Sheng Siong share price had been surging in recent years and even smashed a record high of $1.18 in August 2018. The selling point for Sheng Siong is that it does not have any debts and the business model generates much cash flow. These drivers caused Sheng Siong share price to be immune to market uncertainties. Given the bullish form, should investors enter this counter or is it a value trap to avoid?

In response to my previous article, “From pork seller to CEO of Sheng Siong”, a member wrote an insightful view of Sheng Siong. I found his perspective refreshing and therefore decided to publish his reply (with his consent). In this article, I will also provide some updates and views in relation to the member’s reply.

Member’s view on Sheng Siong share price

Would it be the case that NTUC Fairprice and Dairy Farm are pricing their products at a premium increasingly and Sheng Siong seems to be more “co-operative”? Henceforth, Sheng Siong’s strategy could be to attract mainly the increasing middle to lower income group of consumers as well as the growing segment of retirees who are shifting to shop in Sheng Siong instead of NTUC Fairprice or Giant. Also  the group of shoppers that Sheng Siong attracted, tend not use mobile applications or do online ordering. 

A survey by AsiaOne indicated real situations with NTUC Fairprice. Although Sheng Siong was not featured in the comparison, it would not be a surprise it is offering many sales items at prices lower than NTUC Fairprice.

Sheng Siong has also sponsored very “traditional” variety shows to attract their target consumer segmentand is generous with lucky draws prizes in a transparent manner. Perhaps, this could yield them some tax relief and also it offers a good way to attract consumers to continue shopping with them.

On their choice of Kunming, would it be the case that is where the families of Sheng Siong has more intimate knowledge or connections, so the success rate of business setup could be higher given that they need to pay a lot of incentives to the local authorities for setting up business?

Growing using financial engineering methods may not beneficial and probably if Sheng Siong’s ethos is more geared towards being a “co-operative” type of business, they would not do what the REITS had done.

REITS are main contributors of inflation of prices of in the consumer space. Due to their continuous drive to push up DPU. REITS collectively push up the rental of commercial real estate in Singapore and in turn the operators pass on the higher rentals to the consumers through their products and services.

 In bigger countries, like Australia or US , where there are vast opportunities for business to move from one region to another, there is no options for business in Singapore to escape the REITs as either commercial space in Tuas or in Changi, the REITS operators already “control” the price.

In my personal view, it is increasingly rare to have business owners like the Sheng Siong who are capable and yet socially responsible. Perhaps they are really happy and enjoying this style of business management and as long as they continue to stay profitable, there is no need to hurry or push for the greater profits.

At this current pace, Sheng Siong still has runway to continue operating in the current manner and maintain their dividend policy. Just my personal views and thanks again for your great article.

Sheng Siong share price

Has Sheng Siong fulfilled its destiny?

In my opinion, the above points are valid and real. To a large extent, the reasons why Sheng Siong had continued to do so well despite increased competition and technology disruption are because [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Updated: February 12, 2019 — 12:09 am

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