May 10

Nah, don’t read the share price forum, here’s what you can learn from Sheng Siong’s 2024 AGM


Disclaimer: I’m not a financial analyst. Nor am I trained. So why read this? Because I take a business owner’s lens to observe how other businesses are sustaining their momentum, and whether there’s profit to be made from investing in their businesses.

A Quick Look at Sheng Siong’s financials (taken 29 Apr 2024, from Stockopedia)
A Quick Look at Sheng Siong’s financials (taken 29 Apr 2024, from Stockopedia)

We need to know who our big brother is, so we don’t go and fight with them.

Therefore, we fight in the heartlands, where there’s still business to be made.

That morning, sitting in an airy auditorium, listening to Mr Lim Hock Chee, the CEO of Sheng Siong share why he wasn’t in the shopping malls, I finally understood.

The unsexy way of growing a business

How do you grow a business?


It’s not the most glitzy way, but it’s the most reliable way.

And if you’ve looked at Sheng Siong over the years, they have gradually executed on a simple strategy.

Grow their network of heartland stores by 3 to 6 each year.

But tell this to the markets, and they might think you’re boring, and shouldn’t be invested in.

I will be the first to confess. That before I met the management of Sheng Siong, I was skeptical about what the next leg of their growth would be.

That was why I was wondering why:

  1. They were not expanding into shopping malls,
  2. And that they were not using the $324 million in cash to make some acquisitions.

The shopping mall conundrum

Let’s pretend you were in business school now.

And your professor presented you the curious case of Supermarket X.

He asks you,

Let’s pretend that you’ve just IPO-ed, and listed on the stock exchange.

You’re number 3 in terms of store number in Singapore.

You have 4 main competitors, in Giant, Cold Storage, NTUC, and Carrefour.

How would you grow this business?

The conventional business school wisdom is to know your market, and to go where your market is. That would have naturally led you to where to enter where everyone goes.

The shopping mall.

So it was interesting when the CEO shared about how they didn’t want to compete with the big boys.

He didn’t name the big boys, but we know it’s immediately referring to NTUC, with its network of 230 stores.

But store number doesn’t equate to money. Just look at how much money they made.
But store number doesn’t equate to money. Just look at how much money they made.

NTUC operates with a social mission. And from ‘The Fairprice Story’, you would quickly have read about how NTUC lowered prices on key essentials like eggs to moderate the cost of living concerns.

Or you might also think of Cold Storage, and Giant, under the DFI Retail Group, which is under the Jardine Matheson, the British global conglomerate.

But again, just look at how much their food segment made.
But again, just look at how much their food segment made.

What Sheng Siong didn’t articulate, but what I did see, was that they might lose in terms of competing head to head with the likes of supermarkets in shopping malls…

But they would win if they fought against the supermarkets in heartlands. And the hawkers in wet markets.

They quickly chose a target they could beat, and won, over and over again.

Their competition isn’t NTUC nor Giant nor Cold Storage.

Their competition are the mum and pop stores you see at the bottom of your void deck, the Ustar, Prime Supermarket, that’s in the heartland.

And if you think about how Singapore’s population is spread out, the majority of people don’t live next to a shopping mall.

They live in the heartlands.

And the convenience from shopping at the heartlands, where you don’t have to lug tons of shopping onto the bus, squeeze for 24 minutes at the cashier on a Saturday afternoon at 3pm, means that Sheng Siong has been really, really smart.

They have identified weaker competition which they can reasonably win, and beat them up with strength of execution.

If you’ve seen the mama store, the Shop and Save, and others like Giant and Prime Supermarket slowly disappear, to be replaced by Sheng Siong, you now know why.

Because the more stores they have, the greater their economies of scale, the cheaper their prices, and the more people will shop with them.

Simple strategy, brilliantly executed.

Beat the small players, not the big ones.

Can growth still come?

If you’ve looked at Sheng Siong over the years, you would quickly see that they have grown their profit margins to a high of 30%, through systematically focusing on the sale of live produce.

Taken from IPO Prospectus in 2011, you can see how far (and fast), Sheng Siong has grown.
Taken from IPO Prospectus in 2011, you can see how far (and fast), Sheng Siong has grown.
Just look at how their margins have shot since IPO (Sheng Siong AR 2023)
Just look at how their margins have shot since IPO (Sheng Siong AR 2023)

These are the fresh fish, pork, which tend to have higher margins. But it’s also traditionally the reserve of the stores in the wet markets.

It’s concerning for the wet market hawkers, but not necessarily for Sheng Siong.

Anecdotally, I do know that my own ahma (yes, put whatever weight you want on this example), now buys fresh duck from Sheng Siong, rather than the hawkers, because of how much cheaper it is.

Of course, it’s the economies of scale that Sheng Siong offers, that allows it to negotiate a lower price with suppliers, in exchange for higher volumes.

Why would you, a supplier, sell at a lower price to a hawker that might buy from you 10 ducks a day, when Sheng Siong might easier buy from you 500?

It’s worrying for the future of hawkers, but that is a story for another day.

But if you’re a shareholder, it is promising news.

Because the old, and the young, are increasingly moving to Sheng Siong for their grocery shopping.

When I asked if this margin could still grow, the CEO said he would try as best as he could.

But of course, there are no guarantees.

So the question remains,

Where would the future growth come from?

From 22 to 50 to 100

One aspect is the growth they are trying within Singapore, by growing the number of stores here.

Just look at how fast they have expanded today.

If you look at their IPO prospectus above, you would see that they only started with 22.

The CEO teased that they were potentially looking at buying over some troubled supermarkets, although he did share that there were two approaches.

If he went to them, the price would be higher.

But if they came to him, the price might be much, much lower.

His preference seemed to be for the latter, with a wait and see approach.

To wait for the retailers to really come to their last legs, before he took over them.

They were looking to eventually grow their store network to 100.

Later, Lin Ruiwen, the Executive Director, also shared that Giant, the other supermarket was putting up 2 stores for sale, which they were looking at.

This take over of struggling stores, combined with their continued tendering for new heartland spaces in Singapore, is bound to provide a steady expansion of their growth.

The China growth

During the AGM, many asked about the China stores, and how they were doing.

One shareholder pointed out that Alibaba, who was entering the supermarket space, might potentially affect their business. How would they then compete?

For example, with the huge economies of scale offered by the likes of Alibaba, with their face payments and their already captive markets on the e-commerce platforms, they would naturally seem to win more easily.

Another shareholder worried that they would be wasting more resources trying to conquer China.

But Ruiwen pointed out that they had a willing partner in China, who was equally vested in growing their business.

But if you’re still skeptical, especially at their high Price to Earnings ratio of 16, you might want to take a look at their warchest of $324 million.

What’s the 324 million of cash for?

I asked the Board what they were holding the $324 million for, and the CEO said there were two reasons.

Firstly, in the grocery business, it’s a cash in first business, where they pay suppliers later. Some supermarkets had used the cash they first got to invest in other businesses, which eventually made them go belly up.

The other reason was to finance the inorganic acquisitions that were earlier mentioned, such as the acquisition of struggling supermarkets, and other store spaces from existing retailers.

Their tech stack is now developed inhouse

As a developer myself, what I found interesting was how they had now moved technological capabilities inhouse. Mr Lim shared about how he had faced problems with vendors taking a year to finish the work.

They had now developed an inhouse team of 30 engineers, and had started seeing tech as a core competency they had to grow.

This is a little like DBS Bank, who quickly recognised the importance of technology. Again, I don’t have data from other grocers, but I do know that in retail industries like these, they are often outsourced, rather than in-housed.

Again, contrarian thinking.

Don’t worry, I will work hard

As we closed the meeting, the CEO Mr Lim Hock Chee stood up and said,


The humility and the willingness to work hard is a trait you shouldn’t discount in this management.

Don’t underestimate this man, he’s one of the sharpest managers you would ever see.
Don’t underestimate this man, he’s one of the sharpest managers you would ever see.

They have gone from pig farm owners to stewarding a listed grocer with a $2.3 billion market cap, in the face of stern competition from the likes of government-backed NTUC, and long-time players like the DFI Retail Group.

Don’t underestimate Sheng Siong.

They are coming for your breakfast next.



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