Sheng Siong

Liquidity Position

A current ratio of 2.0 signals a company has appropriate liquidity and adequate ability to finance its current liabilities. Sheng Siong has managed to hover around 1.7 which shows that they have sufficient current assets. Sheng Siong has effectively managed its inventory and it occupies less percentage in current assets. However, Sheng Siong’s quick ratio has dropped to 1.1x.  The reason behind this declining ratios are a considerable increase in Accounts Payable (41.02 %). In 2015 4 new stores were opened, accounts payable could have risen because of the expansion and the slowdown of retail industry. Current assets were used to facilitate setting up & operations of the new stores

[pic 1]

Solvency (debt / equity & Total liabilities / Total Assets)

We can see Sheng Siong has zero debt which indicates that it has used its equity for financing its assets. Its main competitor NTUC Fairprice also follows the same policy and has zero debt. The other 2 competitors have used debt to finance their assets. This puts Sheng Siong at a better position since it doesn’t owe money and have less chances of Bankruptcy. Sheng Siong can take advantage of any new opportunity by instantly. Sheng Siong is not dependent on borrowed funds for its operations or expansion

Liabilities / asset ratio helps us to analyze, what percentage of companies assets are made up of liabilities. In case of Sheng Siong the L / A ratio is approximately 36%, which shows that it has high owner equity and the company equity is more than its liability. Sheng siong also performs better than the industry standards. Lower the percentage of liabilities to assets better is the solvency position

[pic 2]

[pic 3]

Profitability ( Gross and net margins - alone , Peer comparison with margins , Return on asset  

Sheng siong has managed to keep a stable gross and net profit margin, it can be seen that the margin is increasing at a steady rate. Sheng Siong’s profit margins are on par with industry average and in the recent years, even exceeded it. In last 5 years revenue increased by 35% (I.e. from 578.4 in 2011 to 764.4 in 2015). But the net profit increased by 108% (i.e. from 27.3 to 56.8). This shows tremendous increase in the profitability of Sheng Siong. Main reason for this increase is because Sheng Siong has managed to keep its operating expense low.

[pic 4]

Return on Assets

Sheng Siong is a market leader when we compare Return on Assets. It has efficiently managed its assets & converted them into revenue. It has a stable ROA and has always been more than 10%. Sheng Siong has a large difference in ROA when we compare it to its peers.[pic 5]

Appendix

• www.CapitalIQ.com
• Annual report – Sheng Siong