3 things that could send Sheng Siong off the tracks

It could face greater competition as Giant gains momentum.

It would seem like Sheng Siong is hanging on a thread before its positive catalysts completely dry out, now that its planned expansion in China is further delayed. But this is the least of its headaches, as three things pose a challenge on how it plays in the local scene.

Firstly, according to Maybank Kim Eng analyst Gregory Yap, the closure of its the Verge outlet could temporarily affect sales momentum for 1Q17.

Its Verge outlet contribute at least 2% to 3% to the group's sales.

Sheng Siong may also forgo the rights to place a bet at the online stakes as it has no plans to expand its online sales coverage.

Yap noted that Singapore's biggest online grocery shopping service Redmart has been seeking new funding for few months now, stressing the need for Sheng Siong to expand its online base.

"Our view has always been that traditional brick & mortar players are better positioned cost-wise to play the online game, and a chance is being offered for Sheng Siong to take a bigger share of the pie, even if it is just mind share. If it doesn’t grab the opportunity, someone else will," the analyst explained.

Lastly, Yap believes that the recent renovation of Giant in Suntec could increase competition for Sheng Siong, as the former significantly expanded the range of fresh produce it offers.

"We also understand that Giant recently bid in a HDB tender for a shop site, after holding back for a while. While the site was won by a mom & pop operator, we can arrive at the same conclusion, that Giant may be re-energising on the local scene," Yap stated.

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