What can derail Sheng Siong's stock?
Biggest risk for the supermarket group's share price is not its fundamentals, but the earnings multiples the market ascribes to its supposed defensive qualities
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GLANCE at Sheng Siong's latest financial statements, and one might think the company is unstoppable. Sales continue to grow at a healthy clip, margins are improving, and net profit is up by double-digit terms.
Little wonder that the stock continues to be hot. As of last Friday, the supermarket operator was trading at S$1.06 a share, or a whopping 28 times its 2015 earnings.
The company's earnings are set to grow further. Growth drivers this year include contributions from new stores in Circuit Road, Upper Boon Keng Road, Fernvale, and Yishun Junction 9. In the last three months of the year, Sheng Siong will also make a mega-sized overseas foray: A 54,400 sq ft retail space in a shopping mall in Kunming, China, a US$10 million joint venture that it owns 60 per cent of.
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