To support the growing network of stores, Sheng Siong is conducting the ground-breaking for its new distribution centre later this month.
To be completed by late 2029, the centre will help support the company's eventual target of 120 stores. As of 1QFY2026, the company runs 87 stores in Singapore.
Yeo figures that in the meantime, construction costs for the centre will peak in FY2027 and FY2028.
"With store openings having exceeded our expectations, we raise FY2027 earnings by a marginal 2% to factor in a stronger store and revenue base going into FY2027," he says.
See also: CGSI trims target price for Sembcorp Industries to $7.15 on softer renewable energy contributions
Yeo notes that key downside risks to his earnings estimates include slower-than-expected store openings, lower sales demand and per sq ft traction, and the inability to maintain gross profit margin at current levels.
"However, we expect Sheng Siong’s performance to remain resilient, as it targets the mass market value segment, which will enjoy the effects of downtrading in a soft consumption environment.
"Risks related to El Nino are low as energy cost is a small component of its operating expenses, and its diversified sourcing network for substitute products and presence in alternative markets can help mitigate risks of higher input costs," says Yeo.
Sheng Siong Group shares trade at $3.27 as at 11.25 am, down 1.21%.
