Sheng Siong Group SSG SP / SHEN.SI

Investment Analysis

SOOMBA

SMU MBA PT Class of ‘14 (Group C) | Shi Shi AW, Brian HALIM, Lester LEE, Hung Sheng LEE, Alvin J. LIN

市 超 13.3% 9.3%

CHOOSE YOUR SCENARIO

SOOMBA

2

昇 菘 43.3% 30.1%

Number of

Outlets by

FY15

Net Income by

FY15

Projected

Dividend

Pay-out

Projected

Share Price

at exit

Capital Gain Projected

ROI

[S$ ‘000] [S$ ‘000] [S$] [S$ ‘000] %

Best Case Scenario 42 46,400 512 0.87 1,651.7 43.3

Base Case Scenario 38 42,000 485 0.79 1,018.2 30.1

Worst Case Scenario 33 36,400 439 0.68 226.3 13.3

INVESTMENT ANALYSIS - Base case vs. A-Grade Bond (9.3% ROI) SOOMBA

3

INVESTMENT ANALYSIS - Base case vs. A-Grade Bond (9.3% ROI)

BASE CASE SCENARIO FY13 FY14 FY15

Stores Opened 2 2 1

Total Stores 35 37 38

Total Est. Retail Sq. Ft. (Net) 424,242 448,485 460,606

Revenue per retail outlet 21.0 22.0 23.0

Revenue 735.0 814.0 874.0

Net Income 35.3 39.1 42.0

Common Dividends Paid (S$) (31.8) (35.2) (21.0)

Pay-out Ratio 90.0% 90.0% 50.0%

Earnings per Share (S$) 0.0255 0.0282 0.0303

Dividends per Share (S$) 0.0229 0.0254 0.0152

Dividend Yield 4.1% 3.8% 1.9%

Share Price (S$) 0.56 0.68 0.79

PE Ratio 22.0 24.0 26.0

Investment Return Total

Total investment (S$M) 5,000,000

Purchase Price (S$) 0.655

Number of shares purchased 7,633,588

Dividend Pay-out (S$) 484,944

Share Price at exit (S$) 0.79

Investment Value at exit (S$) 6,018,163

Capital Gain (S$) 1,018,163

Total Gain (S$) 1,503,107

Projected ROI 30.1%

SOOMBA

4

Sheng Siong Group 2010 2011 2012

Gross Profit Margin 21.76% 22.10% 22.10%

EBIT Margin 6.12% 5.91% 6.12%

Net Profit Margin 6.78% 4.71% 6.54%

Dairy Farm Int’l 2010 2011 2012

Gross Profit Margin 29.8% 29.4% 28.9%

EBIT Margin 5.1% 5.3% 4.6%

Net Profit Margin 5.2% 5.3% 4.6%

DuPont Analysis Profitability

(Net Income / Sales)

Operating Efficiency (Sales

/ Total Assets)

Financial Leverage

(Total Assets / Equity) ROE

Sheng Siong Group 6.5% 2.6 1.6 27.0%

Dairy Farm Int’l 4.3% 2.7 3.1 36.0%

FINANCIAL PERFORMANCE -vs. Dairy Farm Int’l SOOMBA

5

FYE 31st Dec (S$ m) 2010 2011 2012 A

SS

ETS

Sel

ect

ed

ass

ets

Cash And Equivalents 85.9 122.1 120.4

Short Term Investments 2.1 3.2 2.5

Trading Asset Securities - - -

Accounts Receivable 1.3 2.1 2.0

Other Receivables 0.4 0.9 1.0

Notes Receivable 0.1 - -

Total Assets 175.3 241.2 241.7

LIA

BIL

ITIE

S

Cu

rre

nt

Accounts Payable 48.4 52.8 57.3

Accrued Exp. 21.4 19.5 13.3

Short-term Borrowings 8.8 - -

Curr. Port. of LT Debt 3.2 - -

Curr. Port. of Cap. Leases - - -

Curr. Income Taxes Payable 7.1 8.4 8.7

Other Current Liabilities 22.8 11.1 9.1

Total Current Liabilities 111.8 91.8 88.4

No

n-

curr

ent Long-Term Debt 19.1 - -

Def. Tax Liability, Non-Curr. 0.6 1.1 1.6

Other Non-Current Liabilities - - -

Total Liabilities 131.5 92.9 90.0

FINANCIAL HEALTH -Balance sheet analysis SOOMBA

6

2010 2011 % change from

2010 to 2011 2012

% change from

2011 t0 2012

Days Sales In Receivable

[Collection Period] 1.00 1.08 8% 1.17 9%

Days Sales In Inventory

[Resident Period] 19.05 25.45 34% 28.09 10%

Days Payable Outstanding

[Payment Period] 36.99 40.95 11% 40.46 -1%

Cash Conversion Cycle (16.95) (14.42) -15% (11.19) -22%

FINANCIAL HEALTH -Operating efficiency SOOMBA

7

2010

(S$ m)

% change from

2009 to 2010

2011

(S$ m)

% change from

2010 to 2011

2012

(S$ m)

% change from

2011 to 2012

Cash Flow from Operations 34.0 36.5% 24.9 (26.7%) 33.8 35.7%

Capital Expenditure (38.4) 140% (23.6) 38.5% (12.2) 48.3%

Free Cash Flow (FCF) (4.4) N.M. 1.3 N.M. 21.6 1561%

Dividends Paid (41.2) N.M. - N.M. (38.3) N.M.

Net Free Cash Flow (45.6) N.M. 1.3 N.M. (16.7) N.M.

2010

(S$ m)

% change from

2009 to 2010

2011

(S$ m)

% change from

2010 to 2011

2012

(S$ m)

% change from

2011 to 2012

Dividend Pay-out Ratio 96.7% N.M - N.M. 91.8% N.M.

Dividend Pay-out / FCF - N.M. - N.M. 177.3% N.M.

FCF / CFO - N.M. 5.2% N.M. 60.5% 1063%

Cash Realisation Ratio

(CFO / Net Profit) 79.8% 12.1% 91.2% 14.2% 81.1% -11.1%

FINANCIAL HEALTH -Cash flow SOOMBA

8

MACRO ENVIRONMENT

Population factors

Geographic factors

Economic factors

INDUSTRY OUTLOOK

Consumer demand

Unique business positioning

Competition

BUSINESS FUNDAMENTALS SOOMBA

STRATEGIC ADVANTAGE

Perceived

uniqueness

Low cost

position

STR

ATE

GIC

TA

RG

ET

Ind

ustr

y-w

ide

Sp

ecif

ic s

egm

ents

9

PROSPECTS

New stores in Singapore

Overseas ventures

E-commerce

Net profit enhancement

BUSINESS FUNDAMENTALS SOOMBA

RISKS

Competition

Leasing & Labour costs

Shift in consumer behaviours

Sustaining dividend pay-out

10

BUY

SOOMBA

Sheng Siong Group

11