Lim Siew Khee, an analyst from CGS-CIMB, reiterated the Hold rating on Sheng Siong Group Ltd.. The associated price target remains the same with S$2.21.
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Lim Siew Khee has given his Hold rating due to a combination of factors related to Sheng Siong Group Ltd.’s current and future financial outlook. The company’s significant investment of S$520 million in a new warehouse, which is substantially higher than previous expenditures, is expected to be primarily funded through cash reserves. This investment, while substantial, is projected to have a minimal impact on net profits in the fiscal years 2026 and 2027, with an estimated 2% reduction.
Despite the potential for increased store count and a sustainable net profit growth rate, the current valuation of Sheng Siong Group Ltd. suggests limited upside potential. The Hold rating reflects the balance between the company’s growth prospects and the risks associated with increased costs and competitive pressures. Upside risks include faster-than-expected store expansions and improved margins, while downside risks involve potential increases in staff costs and competitive pricing pressures.
OV8’s price has also changed moderately for the past six months – from S$1.640 to S$2.080, which is a 26.83% increase.