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Sheng Siong Group Ltd’s Share Price Outperformed the Straits Times Index in 2019. Here’s Why

Lawrence Nga

Sheng Siong Group Ltd (SGX: OV8) is one of the largest supermarket chains in Singapore, with a network of 57 stores primarily located in the heartland of the island, as well as two stores in China. The company was established in 1985 and listed in 2011.

Year to date, the company’s stock price was up by more than 10%. In the same period, the Straits Times Index (SGX: STI) grew by less than 2%. What does the company have to thank for its strong performance?

Higher share price 

Many things may cause a stock price to move. Generally, stock-price movement is driven by either business performance or investor’s sentiment.

The former is related to how a business performs in a given period, looking at metrics like growth, margins, production, and others. Here, the ultimate driver is profit. The latter is driven more by investors’ overall mood, which is described by emotional pairs such as greed and fear, optimism and pessimism, bullishness and bearishness, etc.

For Sheng Siong, I believe it’s the former that has driven the changes in its share price in 2019.

Here are some figures to back this up:

Source: Sheng Siong Press Release

Sheng Siong’s delivered solid performance in the latest quarterly update, thus ending the first half of 2019 strongly. All metrics came in stronger on a year-on-year basis, both quarterly and for the first half.

The opening of 13 new stores mainly drove the solid performance. Moreover, the retailer opened its second store in Kunming in the latest quarter.

All in all, a solid performance for the supermarket, which might help explain the positive performance of its stock price for the year.

What’s next

Going forward, competition is expected to remain robust for the industry. So far, though, Sheng Siong has managed to deliver good results despite this.

Also, the company has tendered for six HDB shops and is awaiting the outcome. It’s likely some of these tenders will lead to new store openings in the future.

More reading

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned. The Motley Fool Singapore has recommended Sheng Siong Group Ltd.

Motley Fool Singapore 2019