NUS Student Research Grocery Retail This Report Is Published for Educational Purposes Only by Students Competing in the CFA Institute Research Challenge

NUS Student Research Grocery Retail This report is published for educational purposes only by students competing in the CFA Institute Research Challenge. Sheng Siong Group Ltd

January 5, 2012 Ticker: ●SSG SP (Bloomberg) Recommendation: ●BUY th Price: ●S$0.465 (as of 5 Jan 2012) Price Target: ●S$0.57

Revenue EBIT EPS ROE P/E Ratio Div Yld (S$ mil) (S$mil) (cents) (%) (x) (%) 2010A 628 38 2.84 36.5 16.4 - 2011F 544 34 1.96 28.6 23.7 5.1 2012F 601 41 2.45 26.6 19.0 4.7 2013F 703 49 2.97 30.4 15.6 4.5

Beyond Defensive: Big Punch From a Small Contender

We initiate coverage on Sheng Siong (SSG) with a BUY rating and target price of S$0.57 per share based on a DCF model, offering 23% potential upside. SSG is Singapore’s third largest retailer of groceries and household products with 9.1% market share.  Store Growth from 25 to 37 Drives Top-Line: We expect SSG to achieve growth of 12 new stores over the next 5 years driven by a consolidation in Singapore’s grocery retailing industry. The rapid development of new Housing & Development Board (HDB) estates will further create new catchment areas for supermarket store growth. SSG’s strong cash position, debt-free balance sheet, and positive free cash flow from 2012 affirm its ability to finance store expansions.  Shift in Product Mix to Higher Margin Offerings: We estimate gross margins to improve 228bp to 24% in 2010-2016F due to a shift in product mix to fresh produce and house brands that offer higher margins. This shift reinforces a broader industry trend that sees the supermarket segment capturing market share from wet markets in fresh produce sales. SSG plans to leverage on its logistical capabilities to increase direct sourcing, while also tripling its house brand product offerings over the next 18 months to improve margins. Further, SSG is expected to scale up its operations tremendously following the completion of its centralized distribution center at Mandai Link. This will lead to greater bargaining power for SSG vis-à-vis its suppliers, and attendant increases in supplier rebates and lower cost of sales.  Defensive Industry to Outperform in 2012: We recommend SSG as a strategic inflation hedge as its same store sales (SSS) growth has consistently outperformed CPI trends. Our analysis shows that SSG’s SSS growth (SSSg) has broadly been in line with inflation. More importantly, checks with management reveal that supermarkets are able to pass on increases in food prices to consumers and retain their margins. SSG’s dividend payout ratio of 90% in 2012 translates to a yield of 4.7% and is expected to increase slightly. In order to support its aggressive expansion plans, we forecast a decline in the payout ratio to 70% in 2013-16F.  Valuation Remains Attractive Against Peers: Despite SSG’s share price putting on gains of 40% since its IPO in August 2011, our DCF-based target price of S$0.57 implies a further upside potential of 23% from its current price of S$0.465. Our DCF assumes a 10.5% discount rate and long-term growth of 1.5%. This implies 23x 2012F P/E, and a PEG of 1.27x. We would turn more positive on faster store and SSS growth, as that would provide greater operating leverage and upside potential.

S$ SSG vs STI Price Graph Market Profile 0.60 105 52 Week Price Range S$0.31-0.57 100 Average Daily Volume 10,655,500 0.50 Beta 0.85 95 Dividend Yield (Estimated) 4.70% Shares Outstanding (m) 1,383.53 90 0.40 Market Capitalization (m) S$643 85 Institutional Holdings N.A. Insider Holdings 71.6% 0.30 80 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Book Value per Share S$0.093 Sheng Siong (LHS) Relative STI Index (RHS) Debt to Total Capital CASH Return on Equity 27% Important disclosures appear at the back of this report

CFA Institute Research Challenge 05 January 2012

Figure 2: Strong store expansion between Business Description 2001-2008 leading to a 13% revenue From its humble beginnings in 1983 as a single store in Ang Mo Kio, SSG has evolved to become CAGR the third largest grocery retailer in Singapore, with approximately S$628.4 million in revenue as of FY2010. SSG completed its Initial Public Offering on 17th August 2011 (Figure 1). 25

600 20 Figure 1: Sheng Siong share price and news flow since IPO

15 400 S$ 0.60 September 1, 2011 10 Lease of premises for new 200 store in Woodlands

Number Number of Stores 5 0.55 November 28, 2011

Revenue ( in Revenue millions) September 16, 2011 Sheng Siong 0 0 Lease of premises for 1985 1999 2002 2005 2008 2011 announces plans to 0.50 new store in Thomson Revenue (RHS) Store Count (LHS) expand into Malaysia Source: Company Data, NUS Student Research Figure 3: Heat map showing store 0.45 locations and the concentration of population below median income (target group) 0.40

August 17, 2011 November 11, 2011 0.35 Sheng Siong launches IPO on 3Q11 results released the SGX at $0.33 per share 0.30 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Source: Company Data, NUS Student Research

Riding on Singapore’s supermarket boom, SSG experienced tremendous store growth of 17

Source: Company Data, NUS Student Research supermarkets between 2001 and 2008, growing its revenue at a rate of 13% CAGR from 2006-2010 Figure 4: Supermarkets remain the (Figure 2). SSG is well-known domestically as a supermarket which offers low prices and a unique dominant retail format for SSG mix of fresh and dry products in a supermarket setting. This strategy has been successful in capturing the lower- to middle-income consumer segment in the HDB neighborhoods (Figure 3). 30 40,000 SSG has since progressed from a traditional low-price supermarket to a modern supermarket franchise with wider product offerings. It is looking to grow the higher-margin fresh food and house 20 brands segments, which currently contribute 25% and 5% of total revenue respectively. The 20,000 remaining 70% is made up of dry produce. 10 While supermarkets continue to be SSG’s dominant retail format, the company has recently added 3 0 0 wet market stores and 1 hypermarket, for a total retail space of 27,390sq m (Figure 4). Store 2006 2007 2008 2009 2010 2011 expansion was slowed down between 2008 and 2011 as the company focused its resources on Supermarket Store Area (RHS) building its 50,455 sq m Mandai Link distribution centre. Following a successful restructuring of its Hypermarket Store Area (RHS) key businesses, the opening of Mandai Link and a recent IPO in 2011, the company is now armed Wet Market Store Area (RHS) Store Count (LHS) with ample cash for future growth. Source: NUS Student Research Figure 5: Grocery industry remains robust during a recession Macroeconomic Trends Impending Economic Slowdown 12% Singapore’s extremely open economy is expected to decline in tandem with falling global GDP 8% growth rates worldwide due to the poor US recovery and further aggravation by the European debt 4% crisis. In such periods, consumers usually respond by cutting costs and seeking lower price 0% alternatives. However, the grocery retail industry as a whole is largely insulated from such 2006 2007 2008 2009 -4% economic fluctuations and typically shows variations of much smaller magnitudes (Figure 5). -8% Highly Volatile Food Commodity Prices Grocery spending GDP Food commodity prices are relatively unpredictable in the longer term due to extremely uncertain Source: Euromonitor, Singstat, NUS Student Research supply levels. Such input cost volatility presents a risk to grocery retailers should they be unable to Figure 6: Grocery retailers’ revenues pass on the increased costs. In view of this, Singapore’s grocery retailers’ revenues are highly closely mirror food commodity prices correlated with food commodity growth trends (Figure 6). This can be indicative of strong ability to 50% 5% pass on costs to consumers. 4% Gradual But Consistent Population Growth 25% 3% Total population growth is a key driver of grocery retailers’ revenues. IMF forecasts Singapore’s 2% total population growth to average 1.75% over the next five years, providing the industry with a 0% stable base level of growth. 2006 2007 2008 2009 2010 1% -25% 0% Food commodity prices (LHS) Grocery Retailers' Revenue Growth (RHS) Source: Euromonitor, SingStat, NUS Student Research,

2 CFA Institute Research Challenge 05 January 2012

Figure 7: SSG in a highly concentrated Industry Overview and Competitive Positioning industry The grocery retail industry in Singapore had total revenue of $6.9 billion in 2010, representing a 3% compound annual growth rate (CAGR) since 2005. It is forecasted to grow at 2.8% CAGR from 2010 to 2015. 35.8% 28.5% High Degree of Industry Concentration 22.6% The industry is dominated by three large players which collectively hold more than 60% market 1.6% share in terms of revenue. NTUC Fairprice Co-operative Pte Ltd is the market leader (28.5% as of 2.4% 9.1% 2010), followed by Dairy Farm International Holdings Ltd (22.6%) and Sheng Siong Group Ltd (9.1%) (Figure 7). NTUC and Dairy Farm operate hypermarkets, supermarkets, and convenience NTUC Fairprice Dairy Farm Sheng Siong stores, whereas SSG’s core focus is on supermarkets. The industry is expected to consolidate Carrefour Prime Others further over the next few years, with the top three players capturing market share from smaller, Source: Euromonitor, NUS Student Research more traditional grocery retailers (Figure 8). Figure 8: Grocery retail on a trend of consolidation The Fresh Food Segment: Consumers Turning From Wet Markets to Supermarkets 100% Consumers are increasingly looking to mass retailers such as supermarkets and hypermarkets for their fresh produce due to their needs for convenience – a one-stop shop, greater product range and variety, and longer operating hours (Figure 9). While wet markets are typically open for only 5-7 50% hours in the morning, most supermarkets open between 15-24 hours a day. Supermarkets are therefore able to capitalize on this supply gap and erode market share from the traditional retail

revenue) formats. Based on our preliminary survey and AC Nielsen research, approximately 50% of fresh food expenditure can be attributed to wet markets. With one of the highest gross margins of up to 0% 2006 2007 2008 2009 2010 30-32%, grocery retailers will stand to gain from this shift in shopping trends. Market Share (by % sales Others Carrefour Sheng Siong Dairy Farm NTUC House brands: Maintaining Margins Despite Lower Prices Source: Euromonitor, NUS Student Research House brands are an increasingly important part of a grocery retailer’s business model as they Figure 9: Customers increasingly turning generally give an additional 5-10% gross margin over third-party products. Supermarkets recognize toward hypermarkets and supermarkets this as an effective way to compete via lower prices while still retaining profitability. On the for fresh produce demand side, house brands are well received as a good substitute to the more expensive national Other brands. For instance, NTUC’s house brands have registered double-digit growth in the past few Channels years. Hypermarkets Competitive Positioning Supermarkets SSG targets the low to middle income market segment with their strong value-for-money Wet Markets positioning. (Figures 10 and 11). SSG offers cheaper non-branded products sourced from the region, in contrast to the more premium goods sourced from all over the world by competing 2007 2008 2009 supermarket retailers. Source: AC Nielsen, NUS Student Research Figure 10: Consumer perception on SSG’s Residential Suburban Areas As Optimal Store Locations price and product variety Our survey indicates that close proximity of outlets to where consumers live is the leading factor in 10 their choice of supermarket (Figure 12). This is aligned with SSG’s strategy of targeting the Carrefour Giant heartlands, where the customer catchment area of each store is maximized.

FairPrice Cold Established Image As Industry Cost Leader Storage Shop N SSG has successfully positioned itself in the value-for-money segment, as revealed by our survey 5 Save Sheng 7-Eleven (Appendix 10). Even though it follows the prices set by NTUC and adopts a Hi-Lo pricing model Siong (instead of Everyday-low pricing), consumers perceive it as the cost leader in Singapore’s grocery Cheers Range Range of Products retail industry. Others 0 Working To Become The Leading Fresh Produce Retailer 0 Price5 10 In light of the large and increasing proportion of spending on fresh produce of household Source: KPMG, NUS Student Research expenditure – 55% from NUS Student Research survey (Appendix 10) and 50% from AC Nielsen Figure 11: NUS Student Research research, SSG’s strategic focus on further developing its high-margin fresh produce segment to preliminary survey results on consumer become the retailer of choice for fresh produce seeks to capitalize on this trend. perception on grocery retailers in Singapore Prices 4 3 Shopping 2 Quality Environment 1

Convenience Product Range Cold Storage NTUC Sheng Siong Shop N Save Source: NUS Student Research Preliminary Survey

3 CFA Institute Research Challenge 05 January 2012

Figure 12: Consumers value convenience in Investment Summary their selection of supermarkets (top 5) RAPID STORE EXPANSION: Store Growth from 25 to 37 Drives Top-Line Market Leader in Store Productivity among Domestic Supermarkets Sheng Siong has consistently achieved higher revenue per store and per unit area than its peers. Each SSG store captures 0.4% of the grocery retail market share, highest in class when compared to its domestic peers (Figure 13). We believe that SSG’s high productivity can be translated into greater market share capture with more store openings in the pipeline. Source: NUS Student Research Preliminary Survey Figure 13: SSG has the highest market Further Consolidation Over Forecast Period to Drive Store Growth share per store The grocery retail industry has been in a consolidation phase over the past few years, and we expect 0.5% 0.40% the top three players to continue capturing market share from traditional retailers such as mom-and- 0.4% pop stores and smaller chains that currently make up 35.8% of industry revenue (Figure 8). By 0.23% 0.3% seizing market share from these smaller players, SSG would be able to expand and increase its 0.2% 0.11% 0.08% 0.09% stores with relatively less intense competition from the other large grocery chains. We forecast 0.1% SSG’s top line to deliver 12.1% CAGR from 2011-16F with 12 new store openings, leading to an 0.0% NTUC Sheng Cold Shop N Prime increase in market share from 9.1% in 2010 to 11.3% in 2016F. Siong Storage Save

(2010) New Catchment Areas as a Second Driver of Expansion Stores 105 23 47 62 17 Our spatial analysis reveals opportunities for SSG to grow its store network. HDB has committed to Mkt Share 24% 9.1% 5.4% 5% 1.6% adding nearly 100,000 housing units in Singapore over the next five years, providing new Source: Company, Euromonitor, NUS Student Research catchment areas for SSG. In addition, there are many highly populated areas in Singapore where Figure 14: Strong balance sheet and SSG’s presence is lacking. Based on our strategic competitor matrix (Appendix 11) we have healthy cash flow to drive store growth identified districts such as Bukit Panjang, Sengkang, Toa Payoh, Tampines, and Hougang as high- 200 S$(m) 80 potential candidates which fit SSG’s target consumer segment for its expansion plans (Figure 12). 145 With a low store count, SSG can afford to expand to other areas and capture market share from its 150 126 competitor’s without cannibalizing its own sales. 111 60 91 95 100 86 86 84 Strong Balance Sheet and Growing War Chest to Finance Expansion 61 Post-IPO, SSG has an estimated S$91m of cash and cash equivalents, including S$20m earmarked 48 52 40 39 38 50 25 from the IPO proceeds for expansion. Despite paying high dividends, SSG will be net cash flow 7 positive come 2013F. A debt-free balance sheet offers space for SSG to improve its capital structure 20 0 and raise funds through debt if necessary. With each new store in Singapore estimated to cost S$2m -4 to open, SSG is definitely capable of financing expansion without weighing down on its dividend -50 - yield (Figure 14). Cash & Cash Equivalents (LHS) Free Cash Flow (LHS) Sales / Capex (x) (RHS) Source: NUS Student Research IMPROVING MARGINS: Shift in Product Mix to Higher Margin Offerings Figure 15: Sheng Siong’s sizeable presence at Jurong Fishery Port Sheng Siong: Competitive Advantage in Fresh Produce Members of SSG’s senior management team have an average of 28.5 years of experience in the grocery retail industry in Singapore. The three founding brothers and their family also have expertise in the area of pork, fish and vegetables. This competitive advantage is reflected in SSG’s strong relationship with fresh produce suppliers, improving their sourcing process. Furthermore, there is an emphasis on direct sourcing and declining reliance on third party supplier in fresh produce (Figure 15). According to channel checks at the local fishery port, SSG’s main competitors NTUC and Dairy Farm are far more reliant on third party seafood suppliers due to their lack of expertise and relationship in this segment (Figure 16). This will give SSG an edge in riding the long-term trend in declining wet markets share of fresh produce sales. Shift in Product Mix to Higher Margin Fresh Produce and House Brands Sheng Siong’s management intends to increase the share of fresh produce and house brands, which

Source: NUS Student Research have relatively higher gross profit margins at 25% and 30% respectively. Currently, fresh produce Figure 16: Jong Fresh – Middlemen for and house brands account for 25% and 5% of SSG’s total revenue. In line with consumers’ Dairy Farm’s Seafood Range gravitating towards shopping for fresh produce at supermarkets, SSG plans to increase the contribution from fresh produce to 40% by 2016F (Figure 17).

Source: NUS Student Research

4 CFA Institute Research Challenge 05 January 2012

Figure 17: Gross margin to expand from Meanwhile, SSG’s house brand product range will be expanded from 300 to 1000 products within greater offering of high-margin products the next 18 months. House brands already account for a large part of sales in developed markets 100% 24% (Figure 18). SSG has begun to develop this segment of the market where gross margins are 5-10% higher than manufacturer brands. SSG’s house brands offer both value-for-money brands that aim 80% 23% to attract and retain value shoppers, as well as premium brands that aim to compete with the brand 22% 60% leader. 21% 40% Superior Supply Chain Management to Further Expand Margins 20% The completion of its Mandai Link Distribution facility will allow SSG to increase bulk purchases 20% 19% that will lower cost of sales. As of December 2011, the facility is only 50% utilized with the potential to significantly increase margins on non-perishable dry goods that can be inventoried for a 0% 18% longer period. The build-up of its fleet of delivery trucks coupled with the Mandai Link facility will give SSG greater capacity to backward-integrate and take over the delivery logistics from container Fresh Produce ports to its retail stores. House Brands All Other Goods The facility will allow for a 100% increase in logistics support, such that logistics for two-thirds of sales will be managed by SSG. In exchange for handling its own supply chain, SSG receives SSG Gross Margin (RHS) Source: NUS Student Research supplier rebates of 5-7% of directly-sourced products, reducing cost of sales and expanding Figure 18: House brands account for large margins. part of sales in developed markets 50% 43% DEFENSIVE PLAY: Grocery Retailing Industry to Outperform in 2012 35% 40% Positioned as a Value for Money Retailer 25% 30% 22% SSG is in a win-win situation, where 1) grocery sales are relatively insensitive towards changes in GDP growth and 2) an economic slowdown in 2012 may see consumer preferences switch from 20% premium products to more affordable alternatives. SSG’s brand identity as a value-for-money 10% 5% retailer will appeal to consumers with tightened budgets in the coming years. Research highlights 0% that Singaporean shoppers are becoming more price-sensitive and value-conscious. As of July 2011, SSG US Australia UK Europe 63% of Singaporeans indicated they are promotion-seekers when it comes to shopping for food groceries and personal care items. They will change stores due to promotions (12%), search for promotions (45%) or buy different brands on promotions (6%) (Figure 19). SSG’s advertising and Average house brands contribution to salesin promotion (A&P) efforts target these trends well. Its mainstay television game show “Sheng Siong developed markets Live” is currently into its 9th season. There are also seasonal game shows that advertise special Source: IBM, NUS Student Research promotions, such as during Hari Raya. Unlike the usual retailing business, SSG’s A&P is fully Figure 19: Singaporean customers are funded by suppliers who pay for product placement. price-sensitive and value-conscious A Defensive Inflation Hedge As a hedge towards a faster than expected economic recovery and inflationary environment, Sheng Siong offers investors a strategic inflationary hedge as its SSSg has successfully tracked the CPI over the past 4 years (Figure 20). With rising food prices in 2011 and heightened uncertainty in global economics, we view Sheng Siong as a twin beneficiary of both a possible economic slowdown and rising inflation. Our analysis shows that SSG’s SSSg is positively correlated with inflation; going forward, we estimate that a 1% increase in CPI inflation will increase our forecasted SSSg by 1%. Dividend Yield to Remain High Sheng Siong has committed to maintain a dividend payout ratio of 90% in 2011/2012F. We forecast Change stores due to promotions a 70% dividend payout ratio for the subsequent year through 2016F, implying a 2012F dividend Search for promotions yield of 4.7% based on the Jan 5, 2011 closing price. This is much higher than its peer group Buy different brands on promotions average yield of 2.4%. Even at 50% dividend payout, SSG would yield 2.2%/3.7%/4.3%/4.9% in 2013-16F. Others Source: AC Nielsen, NUS Student Research In comparison to Singapore’s high-yield companies, Singapore REITs averaged 7.8%, Figure 20: Sheng Siong’s historical SSSg Telecommunications yielded 5.9% and Industrials averaged was 5.5%. This highlights the potential broadly in line with inflation for a price floor in SSG as our bear case scenario price target of S$0.38, SSG would yield between 40% 5.5% and 8.4% in 2012-16. This highlights SSG’s strengths as a defensive dividend play with a 4.7% yield and robust growth prospects. 30%

20%

10%

0% 2007 2008 2009 2010 Estimated SSS Growth Inflation (Average 10 yr = 1.9%)

Source: Singstat, NUS Student Research

5 CFA Institute Research Challenge 05 January 2012

Figure 21: Stores to grow from 25-37 in 5 years Valuation 2006A 17 Our DCF-based price target of S$0.57 per share implies a 2012F P/E of 23.3x. This represents a 2007A 4 6.7% 5.4% discount over the 2012F consensus P/E of Diary Farm, and 5.6% premium over regional 2008A 1 CAGR peers. Our price target implies a 23% upside potential from current levels. The price estimate is 2009A 1 based on key assumptions that drive 1) Revenue, 2) Margins and 3) Working Capital needs from 2010A 23 9.1% 2011-16F. 2011F 3 CAGR 2012F 3 Revenue: 2013F 3 We forecast a 12.1% sales CAGR between 2011-16F driven by improving SSSg and store 2014F 2 2015F 2 expansions from 25 to 37 during the forecast period (Figures 21 and 22). Stores are expected to grow at 3 stores per year through 2013F and 2 stores per year thereafter. Revenue per square meter 2016F 37 Source: AC Nielsen, NUS Student Research (psm) is expected to grow at 3.6%, which is the summation of inflation and population long-term Figure 22: Sales to grow at 12.1% CAGR, growth rate of 1.9% and 1.7% respectively. Growth in revenue psm will be directly accounted for in driven by improving SSS growth and store SSSg average of 7.9%. Any outperformance in SSSg that exceeds growth in revenue psm will be expansions attributed to better operating effiency from new store ramp-up and increase in market share capture per store. sqm S$ 50,000 29,000 We estimate SSSg to average 7.9% to account for better operating efficiency from new store ramp 40,000 24,000 up and increase in market share capture per store. Additionally, the Singapore grocery retail market 30,000 is expected to grow at 3.5%, accounting for 1.5% growth in households from 2011-16F and a 2% 19,000 p.a. growth in average household spending on eat-in food, which is slightly above the 10-year 20,000 inflation CAGR of 1.9%. 10,000 14,000 As of December 2011, the company had opened 3 new stores, adding 2,630sqm of operating space, bringing the total store count to 25 (including closure of one store in 2011). In line with Effective Store Operating Area (sqm) management’s guidance, we estimate new stores to ramp-up operating efficiency over 9 months, Revenue psm accounting for only 50% of maximum store area efficiency in its first 9 months of operations. Store Source: Company data, NUS Student Research Figure 23: Improving Core EBIT and operating area efficiency is weighted by store size. Stores above 3500sqm, 1000sqm and those EBITDA margins smaller than 1000sqm have an efficiency factor of 80%, 90% and 100% respectively. 10% 8.2% 8.4% 7.5% Margins: 8% 6.8% Our projections have gross profit margins increasing 228bps to 24% due to a shift in product mix to 6.1% higher margin offerings and increased purchases from direct suppliers instead of wholesalers. Base 6% 5.0% 6.7% 7.0% case assumes a shift in the Fresh Produce, House Brands and Other Goods sales mix of 25%, 5% 6.1% 6.2% 4% 5.3% and 70% respectively in 2010 to 40%, 10% and 50% over the next five years. Gross Margins for 4.2% each segment to remain constant at 30%, 24.3% and 19.3% respectively. Operating profit margin 2% rises 10bps to 7.9% but falls in 2012F by 158bp to 6.7%, mainly to account for the reduction in other income of S$11.3m from gain in disposal of property in 2011. We expect administrative 0% 2008 2009 2010 2011F 2012F 2013F expense as a percentage of sales to be kept constant at 15.6% from 2012-16. At the bottom line, Core EBIT Margins Core EBITDA Margins core (excl. Other Income) net margins will rise gradually 140bps to 6.6%, driven mainly from topline margin expansion. We expect effective tax rate to increase from 12.5% to 17% in 2012 to Source: Company data, NUS Student Research account for less tax reduction and deductible from sales of securities in prior years. Figure 24: Inventory turnover days to rise while payable days fall Working Capital: The base case assumes higher working capital needs as inventory turnover days increases from 19 41 40 40 34 37 to 31 due to operational leverage from the Mandai Link Distribution Centre, which is only 30 25 27 28 operating at 50% capacity. However, better credit terms from suppliers on higher volume of bulk 18 19 19 purchases offset some of the working capital needs. Payable turnover days is expected to increase from 37 to 42 days (Figure 24). 1 1 1 1 1 1 Valuation: Discounted Cash Flow Analysis 2008 2009 2010 2011F 2012F 2013F WACC and terminal value assumptions are summarized in Figure 25. Detailed assumptions on (11) (14) (12) (12) (17) (15) WACC, terminal value and tax are reported in Appendix 7. Inventory Days Trade Receivable Days Trade Payable Days Cash Cycle Days Source: Company data, NUS Student Research Figure 25: Valuation Summary

Discount Rate 10.5% Terminal Growth Rate (%) 1.5% PV of FCF 351.6 PV of Terminal Value 352.3 Enterprise Value 704.0 Add: Net Cash (Debt) 84.1 Equity Value (SGD m) 788.0 No of Shares (mn) 1,384 Value per share (SGD) $0.570 Current Trading Price (5 Jan, Thu) $0.465 Source: Company data, NUS Student Research

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Figure 26: DCF Analysis – Sensitivity Analysis WACC/Terminal Equity Value Growth Bull Case (S$0.73, +57% Upside, 29x implied 2012F P/E) Matrix Terminal Growth (%) Stronger store and same store sales growth. SSG stores to grow from 25 to 42, or 5 stores more 1.0 1.5 2.0 2.5 3.0 than the base case assumptions. Revenue per square meter growth to increase by 1% to average

9.5 0.62 0.64 0.66 0.69 0.72 4.6%. Fresh Produce contribution to revenue will grow an additional 5% to 45% by 2016, leading

10.0 0.59 0.60 0.62 0.64 0.67 to gross margin of 24.6%. Improving credit terms to 45 days in 2016 leads to a longer Cash (%) 10.5 0.56 0.57 0.59 0.61 0.63 Conversion Cycle and decreases working capital needs. 11.0 0.53 0.54 0.56 0.57 0.59

11.5 0.51 0.52 0.53 0.54 0.56 Base Case (S$0.57, +23% Upside, 23.3x implied 2012F P/E, Appendix 6) WACC 12.0 0.49 0.50 0.51 0.52 0.53 Source: Company data, NUS Student Research Stable store growth with rising margins. SSG stores to grow from 25 to 37 by 2016. Revenue per Figure 27: Price Target With Sensitivity square meter growth to average 3.6% to account for inflation and population growth. Product mix Analysis to shift to 40% fresh produce and 10% housebrands (of total revenue), in line with management guidance. Working capital needs to increase as trade payable and inventories turnover days increase cash conversion cycle by 6 days over the forecast period. Bear Case (S$0.38, -18% Downside, 15.5x implied 2012F P/E) SSG to grow by 8 stores to 33 stores in 2016. Revenue per square meter growth to be kept at 0%, accounting for market share cannibalization by competitors and inability to pass down higher costs from inflation to customers. Growth in sale of fresh produce and house brands to slow, leading to a smaller increase in gross margin by 53bp. Credit terms to remain at 2011’s level of 40 days, leading to a 9 day increase in cash conversion cycle. S$0.38 looks like a well supported level as dividend yield of 5.8% becomes attractive as a dividend stock. Valuation: Multiple Analysis Source: Yahoo! Finance, NUS Student Research In this section, we reference the P/E valuation of regional grocery retailers. Consensus P/E range Figure 28: Impact of Changes in Key for Asian-listed grocery retailing stocks for 2012F was 10-29x (Figure 29). In our view, Lianhua Assumptions and Wumart are the closest grocery retailing peer companies in terms of market capitalization. 0.80 Although both companies are operating in China, their business model of using a centralized 0.70 procurement system, Lianhua’s model of fresh and dry products and Wumart’s focus on low cost 0.60 0.05 0.73 0.04 0.03 0.05 put them in a position of close comparison for SSG. 0.50 0.06 0.02 0.57 0.40 0.07 In Singapore, Dairy Farm is significantly bigger than SSG and commands a larger market share in 0.04 0.30 0.38 the retailing business through its supermarkets Shop N Save, Cold Storage and convenience store 7- 0.20 0.10 Eleven. Whilst Dairy Farm has the advantage of being a market leader in the region, it is exposed to - headwinds from a slowdown in Greater China. We believe that SSG deserves to trade at a 5% discount valuation to Diary Farm instead of its current 23% (Figure 30). SSG’s strong balance sheet, store growth prospects, and innovation in the Singapore retail grocery market puts it in a prime position to benefit from the shifts in the grocery retail landscape.

Source: NUS Student Research Figure 29: Peer Comps P/E Ratios

50 40 30 20 10 -

2011F 2012F Average P/E

Source: Bloomberg, NUS Student Research Figure 30: SSG Historical P/E Band 40 Sheng Siong's 12-month forward P/E discount vs. domestic peers 30

P/E Historical Average Sheng Siong Forward P/E Source: Bloomberg, NUS Student Research

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Figure 31: Industry P/B vs. ROE Financial Analysis P/B Growth Analysis 14 Dairy Farm 2012F: Net income -7.6% YoY, to S$34m. Core net income +24.8% (Figure 33). Core topline sales 12 CP All growth is expected to fall 13.4% in 2011F before recovering 10.5% in 2012F due to new store openings in late 2011. The decline in 2011 is due to the closure of SSG’s Ten Mile Junction and 10 Tanjong Katong branch, each of which accounted for between 5% to 10% of 2010 sales revenue. 8 Other operating income fell sharply in 2012F after growth of 132%, 23% and -1% in 2009, 2010 and 2011 respectively. The gains were largely attributed to gains from disposal of property, 6 Sheng Sun Art investments and government cash grants from a jobs credit scheme. We have maintained an Siong Retail additional recurring income of S$4m to account for existing rental received from sub-leasing 4 CRE Wumart arrangements, sale of scrap materials and advertising and promotion income. 2 Lianhua Margin Analysis ROE (%) SSG's core net margin is expected to increase from 5.0% to 5.6% in 2011-12F. We analyzed core 0 margins as the company had inflated margins in 2009-2011F due to gains from investment and 0% 10% 20% 30% 40% 50% 60% Source: Bloomberg, NUS Student Research property disposal. We expect net margin to stabilize between 6 - 6.5% after 2015 (Figure 33). Figure 32: Industry Net Profit Growth vs. Operating margin forecast constant administrative expenses of 15.6% of sales in 2011 as higher P/E staff costs linked to the opening of the Mandai Link Distribution Centre is partially offset by store Net Profit closure. Growth (%) 50% Sun Art Balance Sheet Analysis Retail We forecast that SSG cash conversion cycle will worsen slightly from negative 17 days in 2010 to 40% negative 11 days in 2016F. This is driven by an increase in inventories from bulk purchases following the opening of the Mandai Link Distribution Centre. This will lead to inventory turnover 30% Sheng days increasing from 19 to 31 in 2016F but this is slightly offset by improving credit terms, from 37 Siong Wumart days today to 42 days over the next five years. Since 2009, SSG's suppliers have begun to offer 45 20% Lianhua CP All days credit terms on some products and others are likely to be pressured to follow suit. The sharp CRE decline in other receivables during 2010 was the result of a S$36.7m non-trade settlement with 10% affiliated companies before SSG's IPO. Dairy Farm P/E Cash Flow Analysis 0% Sales growth and margin expansion will increase operating cash flow (OCF). According to our 5 10 15 20 25 30 35 estimate, SSG will generate an average of S$67m in operating cash flow per year from 2011-16F. Source: Bloomberg, NUS Student Research We forecast OCF to Sales ratio to improve from 5.4% in 2010 to 8.2% in 2016F. This cash flow Figure 33: Margins to fall in 2012 due to will be used to finance the S$112m estimated investment in capital expenditures from 2011-16F, a closure of 2 stores, but core margins to rise reduction in financial borrowings and fund dividend payments. Free cash flow (FCF) is forecasted gradually to stay positive with FCF yield improving from 1% to 7.7% in 2016F versus peer average of 7% in 1,000 S$(m) 30% 2007-10. Net cash flow after accounting for dividends is expected to grow from S$5m to S$18m a year in 2016F. The only exception is in 2012F where net cash flow is negative due to the 90% 20% dividend payout policy. We estimate a decline in dividend payout ratio to 70% in 2013, with dividend per share rising from 2.38cents to 3.19 cents in 2011-16F. 500 10% Potential Catalysts Same Store Sales Growth to Witness Sharp Turnaround - 0% Same store sales growth is a key indicator to assess the performance of retail companies. SSG’s 2008 2009 2010 2011E 2012E 2013E SSSg has been relatively flat in 2009-11 due to a focus on migrating operations to the new Mandai Revenue (LHS) Link facility in 2011. We expect SSSg to dip slightly before posting strong growth in 2012, after Core Net Margin Core Operating Margin factoring in three new store openings in 2011 and early 2012. The ramp up in store efficiency will Core Gross Margin benefit SSG’s SSSg and offer a more positive outlook on the business. Source: Company Reports, NUS Student Research Expansion Into Malaysia The company has expressed interest and commitment to longer term expansion plans into Malaysia. Foreign business operators in Malaysia face regulations that include a 30% local ownership rule among others. Management has highlighted that they are in talks with several potential partners who could surface as financial investors and/or a real estate company, and intends to introduce pilot stores in 2012. We have factored some write downs from initial operations but see upside risk potential to our forecast if a good business partner is found. Worse than Expected Economic Slowdown We view Sheng Siong as a highly defensive staple stock that will be least affected in an economic slowdown. There is currently a great deal of uncertainty in the global economic environment. Should Singapore enter a prolonged recession, we would expect investors to increase equity allocations to defensive names and price-conscious consumers to trade down to alternative value- for-money grocery retailers like Sheng Siong.

8 CFA Institute Research Challenge 05 January 2012

Investment Risks Heavy Reliance on Flagship Stores The existence of four key stores (as of Dec 2011), where each contribute between 5-10% of revenue, presents a substantial risk should these stores cease to operate. In FY2011, SSG had to close two of its key stores, the Ten Mile Junction and Tanjong Katong branches. This resulted in a material decline in revenues and rental income.

Renewal and Securing of Leases May Stifle Store Growth Figure 34: Failure to renew leases may With about 84% of their leases expiring within two years, any problems with renewals or rental fees slow store growth will significantly impact SSG’s revenue and cause its stock price to fall in the near term. Management has expressed concern over the lease renewal for a 1,528sqm store currently rented 12 100% from Jurong Superbowl which expires in 2013. Failure to secure new leases for store growth will 10 similarly depress sales growth and stock price. However, we feel that leases by E Land Properties 80% and HDB that account for 50% of total leases will most likely be approved for lease renewals as 8 60% SSG has been with the landlords for a long period of time and are anchor tenants in the respective 6 establishments (Figure 34). 40% 4 Intensifying Competition among the Top 3 Mass Grocery Retailers Grocery retailers market size is expected to maintain stable growth of 3.5% CAGR in 2011-16F. 20% 2 However, fierce competition remains as grocery retailers compete for market share and new leases. 0 0% Store expansion is a key driver for top-line growth and SSG being the smallest among the top three 2011 2012 2013 2014 2015 2016 grocery retailers may be outbidded for new leases. As a single-format operator, Sheng Siong could No. of Leases Due also lose market share from cannibalization attributed to the growing multi-format grocery retailers. % of Leases Expiring Source: NUS Student Research In fact, hypermarkets and convenience stores are witnessing strong growth at 7.8% and 7.1% respectively. Slowing Population Growth Figure 35: Slowing population growth to Over the past five years, the country’s population growth has been slowing steadily, from 4.3% in limit growth of grocery retailing market 2007 to 2.1% in 2011. With the growth of Singapore citizens consistently falling below 1%, 25% changes in population growth are predominantly driven by permanent residents (PRs) and non- residents. An economic slowdown may see non-residents leaving the country, thus reducing the 20% market size of the grocery retailing industry (Figure 35). 15% Tightening Foreign Population Policies May Put Pressure on Staff Costs 10% After the watershed General Elections in May, foreign labor numbers may start to fall if the government tightens its PR and non-resident policies to address concerns over the influx of 5% foreigners. This puts upwards pressure on SSG’s staff costs as it currently depends on 700-800 foreign workers. Furthermore, low wage foreign workers make up a significant portion of their 0% customer base, with SSG packing their products specifically for their purchases. Hence, apart from -5% rising staff costs, a falling foreign customer base may also significantly affect SSG in the near term.

-10% Wet Market Sentimental Value Put Sheng Siong’s Expansion Plans on Hold Total Population Singapore Residents Singaporeans perceive local wet markets as a crucial part of their national identity, thus increasing Foreign Population political pressure to retain wet markets. This will pose an obstacle should Sheng Siong move to Source: Singstat aggressively capture market share from the wet markets (Refer to Appendix 13 for case study of Elias Market).

Appendix

Appendix 1. Consolidated Income Statement ...... 11 Appendix 2. Consolidated Core Income Statement ...... 12 Appendix 3. Consolidated Balance Sheet & Cash Flow Statement ...... 13 Appendix 4. Scenario Analysis – Earnings Assumption Comparison ...... 14 Appendix 5. Peer Comparables ...... 15 Appendix 6. DCF-Base Case Valuation ...... 15 Appendix 7. Weighted Average Cost of Capital (WACC) ...... 15 Appendix 8. Sheng Siong Group Structure ...... 16 Appendix 9. Board of Directors Chart ...... 17 Appendix 10. NUS Student Research Preliminary Survey on Consumers’ Grocery Shopping Habits and Perceptions ... 18 Appendix 11. Competitor outlet analysis ...... 20 Appendix 12. Singapore supermarket store distribution sorted by district ...... 21 Appendix 13. Comparison between traditional wet market and Sheng Siong’s Elias Wet Market ...... 22 Appendix 14. Sheng Siong’s Live Seafood Procurement – Jurong Port Fishery ...... 23 Appendix 15. Store Lease Analysis ...... 25 Disclosures: ...... 26

Appendix 1. Consolidated Income Statement Sheng Siong: Consolidated Income Statement (2008-13E) S$ (mn) 2008 2009 2010 2011E 2012E 2013E % Change YoY 2008 2009 2010 2011E 2012E 2013E Revenue 610 625 628 544 601 703 Revenue 2.5% 0.5% -13.4% 10.5% 16.9% - Cost of Sales (496) (497) (492) (423) (465) (541) - Cost of Sales 0.2% -1.1% -13.9% 9.8% 16.4% Gross Profit 114 128 137 121 136 162 Gross Profit 12.4% 6.5% -11.5% 12.7% 18.8% Other Income 6 13 16 16 4 4 Other Income 132.0% 23.1% -1.0% -74.6% 0.0% Operating Expenses (94) (102) (104) (91) (100) (117) Operating Expenses 8.2% 2.3% -12.1% 9.1% 16.9% - Distribution Expenses (5) (4) (4) (4) (5) (6) - Distribution Expenses -4.8% 1.3% -0.4% 10.5% 16.9% - Administrative Expenses (88) (96) (98) (85) (94) (110) - Administrative Expenses 9.0% 2.1% -13.6% 10.5% 16.9% - Other Expenses (1) (1) (1) (2) (1) (1) - Other Expenses 2.3% 31.7% 69.6% -44.8% 16.9% Operating Profit 26 40 49 45 41 49 Operating Profit 53.5% 22.7% -7.0% -10.5% 21.6% Net Finance Income 1 0 0 (0) 0 0 Net Finance Income -74.6% -86.1% -182.8% -1405.1% -8.0% Profit Before Tax 27 40 49 45 41 50 Profit Before Tax 50.0% 22.2% -7.1% -9.8% 21.4% Income Tax (6) (6) (6) (9) (7) (8) Income Tax 4.8% -3.1% 41.1% -19.3% 21.4% Net Profits 21 34 43 37 34 41 Net Profits 63.2% 27.0% -14.0% -7.6% 21.4% Dividend Paid - - - 33 30 29 Dividend Paid -7.6% -5.6%

Key Metrics 2008 2009 2010 2011E 2012E 2013E Margins As % Sales 2008 2009 2010 2011E 2012E 2013E Same Store Sales Growth 10.3% 2.2% 1.7% 0.6% 9.5% 12.5% Gross Margin 18.7% 20.5% 21.8% 22.2% 22.7% 23.0% Total Stores 22 23 22 25 28 31 Other Income 0.9% 2.1% 2.5% 2.9% 0.7% 0.6% Total Effective Store Area (sqm) 30,894 31,495 31,624 27,390 29,184 32,922 Operating Expenses 15.4% 16.2% 16.5% 16.8% 16.6% 16.6% Effective Tax Rate 23% 16% 13% 19% 17% 17% - Distribution Expenses 0.7% 0.7% 0.7% 0.8% 0.8% 0.8% Sales / Capex (x) - 39.1 16.4 18.6 29.4 44.9 - Administrative Expenses 14.5% 15.4% 15.6% 15.6% 15.6% 15.6% Capex / Depreciation (x) 0.5 3.5 9.0 4.2 2.4 1.6 Operating Margins 4.2% 6.3% 7.8% 8.3% 6.7% 7.0% Operating Margins Ex. Other Inc 3.3% 4.3% 5.2% 5.4% 6.1% 6.4% 45 $1,000 EBIT Margin 4.2% 6.3% 7.8% 8.3% 6.7% 7.0% EBITDA Margin 5.0% 7.1% 8.4% 9.6% 8.2% 8.4% 40 $900 Net Margin 3.4% 5.4% 6.8% 6.7% 5.6% 5.9% $800 35 Ratio Analysis 2008 2009 2010 2011E 2012E 2013E $700 30 Returns $600 ROE 30.8% 37.2% 48.0% 38.7% 26.6% 30.4% 25 ROA 13.4% 16.5% 24.3% 18.0% 15.8% 17.4% $500 20 Efficiency $400 Inventory Days 18 19 19 25 27 28 Number Stores of Number 15 $300 in Revenue ( millions) Trade Receivable Days 1 1 1 1 1 1 Trade Payable Days 30 34 37 41 40 40 10 $200 Cash Cycle Days (11) (14) (17) (15) (12) (12) 5 $100 Gearing Current Ratio 1.5 2.0 1.3 1.6 1.5 1.5 0 $- Net Debt to Equity Cash Cash Cash Cash Cash Cash 2006A 2007A 2008A 2009A 2010A 2011F 2012F 2013F 2014F 2015F 2016F Revenue # of Stores 11

Appendix 2. Consolidated Core Income Statement Sheng Siong: Consolidated Core Income Statement (2008-13E) S$ (mn) 2008 2009 2010 2011E 2012E 2013E % Change YoY 2008 2009 2010 2011E 2012E 2013E Revenue 610 625 628 544 601 703 Revenue 2.5% 0.5% -13.4% 10.5% 16.9% - Cost of Sales (496) (497) (492) (423) (465) (541) - Cost of Sales 0.2% -1.1% -13.9% 9.8% 16.4% Gross Profit 114 128 137 121 136 162 Gross Profit 12.4% 6.5% -11.5% 12.7% 18.8% Other Income 6 7 6 4 4 4 Other Income 18.4% -13.6% -29.8% 0.0% 0.0% Operating Expenses (94) (102) (104) (91) (100) (117) Operating Expenses 8.2% 2.3% -12.1% 9.1% 16.9% - Distribution Expenses (5) (4) (4) (4) (5) (6) - Distribution Expenses -4.8% 1.3% -0.4% 10.5% 16.9% - Administrative Expenses (88) (96) (98) (85) (94) (110) - Administrative Expenses 9.0% 2.1% -13.6% 10.5% 16.9% - Other Expenses (1) (1) (1) (2) (1) (1) - Other Expenses 2.3% 31.7% 69.6% -44.8% 16.9% Operating Profit 26 33 38 34 41 49 Operating Profit 29.0% 15.4% -12.9% 20.9% 21.6% Net Finance Income 1 0 0 (0) 0 0 Net Finance Income -74.6% -86.1% -182.8% -1405.1% -8.0% Profit Before Tax 27 34 39 34 41 50 Profit Before Tax 26.2% 14.8% -13.0% 21.8% 21.4% Income Tax (6) (6) (6) (6) (7) (8) Income Tax 4.8% -3.1% 4.4% 9.0% 21.4% Net Profits 21 27 32 27 34 41 Net Profits 32.5% 19.0% -16.3% 24.8% 21.4% Dividend Paid - - - 24 30 29 Dividend Paid 24.8% -5.6%

Margins As % Sales 2008 2009 2010 2011E 2012E 2013E Gross Margin 18.7% 20.5% 21.8% 22.2% 22.7% 23.0% Other Income 0.9% 1.1% 0.9% 0.7% 0.7% 0.6% Operating Expenses 15.4% 16.2% 16.5% 16.8% 16.6% 16.6% - Distribution Expenses 0.7% 0.7% 0.7% 0.8% 0.8% 0.8% - Administrative Expenses 14.5% 15.4% 15.6% 15.6% 15.6% 15.6% Operating Margins 4.2% 5.3% 6.1% 6.2% 6.7% 7.0% Operating Margins Ex. Other Inc 3.3% 4.3% 5.2% 5.4% 6.1% 6.4% EBIT Margin 4.2% 5.3% 6.1% 6.2% 6.7% 7.0% EBITDA Margin 5.0% 6.1% 6.8% 7.5% 8.2% 8.4% Net Margin 3.4% 4.4% 5.2% 5.0% 5.6% 5.9%

Appendix 3. Consolidated Balance Sheet & Cash Flow Statement Sheng Siong: Consolidated Balance Sheet & Cash Flow Statement (2008-13E) S$ (mn) 2008 2009 2010 2011E 2012E 2013E S$ (mn) 2008 2009 2010 2011E 2012E 2013E Cash & Cash Equivalents 86 39 86 91 84 95 Profit Before Tax 26.6 39.9 48.7 45.3 40.8 49.5 Inventories 26 25 26 32 38 44 D&A 5.0 1.2 (5.2) 7.0 8.6 10.1 Trade & Other Receivables 13 42 5 3 3 3 Others (0.6) (1.1) (0.3) 0.0 (0.3) (0.3) Other Investments 3 73 - - - - Change in Net W/C (4.7) 21.4 (1.8) (18.0) 2.8 2.6 Current Assets 128 179 117 126 125 142 Income Tax Paid (3.4) (7.8) (7.3) (6.1) (8.6) (6.9) Operating Cash Flow 23.0 53.6 34.0 28.2 43.3 55.0 PPE 19 24 58 77 89 94 Investment Properties 7 - - - - - Purchase of PPE (2.7) (16.0) (38.4) (29.3) (20.4) (15.7) Total Assets 154 203 175 203 214 236 Sale of PPE (4.2) (39.9) 30.8 3.7 - - Other 0.7 1.0 0.3 0.3 0.3 0.3 Trade & Other Payables 76 81 81 67 77 85 Investing Cash Flow (6.2) (54.8) (7.3) (25.3) (20.1) (15.4) Financial Liabilities 0 - 3 - - - Current Tax Payable 10 8 7 10 8 9 Net Loan/Borrowing (0.1) (0.0) 22.3 (22.3) - - Current Liabilities 86 89 92 77 85 94 Amounts due to Related Parties 10.8 (45.8) 39.0 - - - Others (0.0) (0.0) (41.2) 24.8 (30.5) (28.8) Financial Liabilities - - 19 - - - Financing Cash Flow 10.7 (45.8) 20.1 2.5 (30.5) (28.8) Deferred Tax Liabilities 1 1 1 1 1 1 Total Liabilities 87 89 111 78 85 95 Change in Cash 27.5 (47.1) 46.8 5.5 (7.3) 10.8 Total Assets Less Current Liabilities 67 115 84 126 130 142 Share Capital 2 16 30 156 156 156 - Merger Reserve - - - (68) (68) (68) Fair Value Reserve - 13 - - - - Accumulated Profits (RE) 65 84 34 38 41 53 Foreign Currency Translation Reserve 0 0 0 0 0 0 Total Equity 67 114 64 126 129 141 Total Equity & Liability 154 203 175 203 214 236

Appendix 4. Scenario Analysis – Earnings Assumption Comparison Scenario Analysis – Earnings Assumption Comparison 2011F 2012F 2013F 2010-13F CAGR S$ (m) 2010 Bear Base Bull Bear Base Bull Bear Base Bull Bear Base Bull Sales 628 544 544 544 576 601 611 633 703 740 0.3% 3.8% 5.6% - Same store sales growth 1.7% 0.6% 0.6% 0.6% 5.7% 9.5% 11.3% 6.2% 12.5% 16.7% 3.5% 5.8% 7.3% - No. of stores 22 25 25 25 27 28 29 29 31 33 9.6% 12.1% 14.5% Gross Profit 136.8 121.0 121.0 122.3 129.0 136.3 140.3 142.8 162.0 173.1 1.5% 5.8% 8.2% Operating Profit 48.7 45.3 45.3 46.6 37.3 40.5 42.9 41.7 49.3 54.3 -5.1% 0.4% 3.7% Net Income 42.6 36.7 36.7 37.8 31.2 33.9 35.9 34.8 41.1 45.3 -6.5% -1.2% 2.0% Core Net Income 32.4 27.1 27.1 28.2 31.2 33.9 35.9 34.8 41.1 45.3 2.4% 8.3% 11.8%

Sales Growth 0.5% -13.4% -13.4% -13.4% 5.9% 10.5% 12.2% 9.9% 16.9% 21.1% Gross Profit Growth 6.5% -11.5% -11.5% -10.6% 6.6% 12.7% 14.7% 10.7% 18.8% 23.3% Operating Profit Growth 22.7% -7.0% -7.0% -4.2% -17.6% -10.5% -7.9% 11.7% 21.6% 26.5% Net Profit Growth 27.0% -14.0% -14.0% -11.4% -14.9% -7.6% -5.0% 11.5% 21.4% 26.2%

Gross Margin 21.8% 22.2% 22.2% 22.5% 22.4% 22.7% 23.0% 22.6% 23.0% 23.4% Operating Margin 7.8% 8.3% 8.3% 8.6% 6.5% 6.7% 7.0% 6.6% 7.0% 7.3% Net Margin 6.8% 6.7% 6.7% 6.9% 5.4% 5.6% 5.9% 5.5% 5.9% 6.1% Core Net Marin 5.2% 5.0% 5.0% 5.2% 5.4% 5.6% 5.9% 5.5% 5.9% 6.1%

DCF Fair Value (S$) 0.38 0.57 0.73

Appendix 5. Peer Comparables Mkt. EPS Cap. EV/Sales EV/EBITDA P/E Ratio CAGR PEG P/B ROE ROA USD Bn 2010 2011F 2012F 2013F 2010 2011F 2012F 2013F 2010 2011F 2012F 2013F FY11-13F 2012F 2012F 2012F 2012F Sheng Siong Group (SGD) 0.50 1.01x 0.93x 0.78x 13.6x 11.4x 9.2x 23.7x 19x 15.6x 23.1% 1.03 4.99 26.6% 15.8%

Dairy Farm International (USD) 13.20 1.65x 1.44x 1.33x 1.20x 20.9x 18.2x 16.6x 14.6x 30.5x 28.3x 25.9x 23.2x 11.4% 1.67 10.71 51.8% 13.9%

China Resources Enterprise* (HKD) 8.37 0.88x 0.71x 0.58x 0.48x 11.9x 9.9x 8.4x 7.0x 28.4x 27.2x 22.6x 18.4x 22.5% 1.68 1.91 8.9% 3.2%

Lianhua Supermarket (HKD) 1.46 0.18x 0.15x 0.14x 0.13x 4.4x 3.3x 3.0x 2.6x 31.5x 12.7x 11.2x 9.8x 17.3% 0.48 2.20 24.2% 4.8%

CP All Plc (THB) 7.77 1.83x 1.56x 1.33x 1.16x 16.2x 17.6x 14.8x 12.7x 26.5x 32.2x 26.5x 21.6x 23.0% 1.53 10.45 44.9% 17.1%

Wumart Stores (HKD) 2.66 1.41x 1.03x 0.86x 0.72x 24.0x 13.1x 10.9x 9.3x 38.7x 25.9x 21.1x 17.7x 21.2% 0.99 4.24 21.4% 9.7%

Sun Art Retail Group (HKD) 11.67 1.05x 0.84x 0.69x 16.3x 12.9x 10.4x 40.5x 29.3x 23.4x 33.3% 0.85 5.90 30.2% 6.2%

Regional Supermarket Mean 1.19x 0.99x 0.85x 0.73x 15.5x 13.0x 11.1x 9.4x 31.1x 27.8x 22.8x 19x 21.5% 1.18 5.77 29.7% 10.1%

Wal-Mart Stores Inc (USD) 211.92 0.66x 0.63x 0.60x 0.57x 8.6x 8.1x 7.8x 7.4x 14.6x 15.3x 13.8x 12.6x 4.9% 1.20 2.90 21.6% 8.6%

Tesco PLC (GBP) 41.16 0.61x 0.55x 0.53x 0.51x 7.8x 6.6x 6.6x 6.4x 14.3x 9.6x 9.5x 9.4x 0.6% 1.06 1.40 16.0% 7.2%

Carrefour SA (EUR) 16.34 0.27x 0.3x 0.29x 0.28x 10.8x 6.3x 6.0x 6.7x 36.4x 13.2x 12.5x 10.9x 14.4% 1.89 1.30 10.1% 3.5%

International Supermarket Mean 0.51x 0.50x 0.48x 0.45x 9.1x 7.0x 6.8x 6.5x 21.8x 12.7x 11.9x 11.0x 6.6% 1.38 1.87 15.9% 6.4%

Source: Company Data, Bloomberg, NUS Student Research. *Excl. CRE EPS CAGR in Average

Appendix 6. DCF-Base Case Valuation

DCF-Base Case Valuation

FY Dec (SGD m) 2010 2011F 2012F 2013F 2014F 2015F 2016F Terminal Value EBIT 48.7 45.3 40.5 49.3 57.7 66.2 75.7 0 YoY Growth 22.7% -7.0% -10.5% 21.6% 17.1% 14.7% 14.3% 0 Add: Depreciation & Amortization 4.2 7.0 8.6 10.1 11.6 13.3 15.1 0 Less: Tax Provision (6.1) (8.6) (6.9) (8.4) (9.9) (11.3) (12.9) 0 Less: Capex (38.4) (29.3) (20.4) (15.7) (14.6) (15.6) (16.6) 0 Add: Changes to Working Capital (1.8) (18.0) 2.8 2.6 2.9 (0.3) (0.7) 0 Total FCF to the Firm 6.6 (3.5) 24.6 37.8 47.8 52.4 60.6 868.4 Discounted FCF 6.6 (3.5) 24.6 34.2 39.1 38.8 40.6 352.4 FCF Growth (%)

Appendix 7. Weighted Average Cost of Capital (WACC)

Weighted Average Cost of Capital (WACC):

A key variable in the DCF model is the estimates used to calculate WACC. The assumptions for our WACC are defined in the table below.

NUS Student Research WACC Estimates Description Risk-free rate 3% Risk-free rate of 3% vs. SGS 10-Year Bond Rate of 1.64% Market Return 8% Market Return of 8% vs. the STI Index 10-Year CAGR of 5% Beta 0.85 Beta of 0.85 vs. Dairy Farm beta of 0.58 and regional peers beta of 0.77 Small Cap Risk Premium 2% A small cap risk premium of 2% was added to account for liquidity and volatility risk Discount Rate 10.5% Discount rate of 10.5% vs. theoretical WACC of 9.3% to take a more a conservative approach Tax Rate 17% In-line with Singapore corporate tax rate Terminal Growth Rate 1.5% 15

Appendix 8. Sheng Siong Group Structure

Appendix 9. Board of Directors Chart

Years in Post-IPO Grocery Share Name Position Retail Age Background Capital

Mr Lim, Chief 28 Years 49 Mr Lim is responsible for the operations and strategic growth of the Group. 380,000,000 Hock Chee Executive He was one of the founding shareholders of CMM Marketing and SS Officer Supermarket. He has been with the Group since SS Supermarket 27.5% incorporated in 1983. Mr Lim Hock Chee, Mr Lim Hock Eng and Mr Lim Hock Leng are brothers.

Mr Lim, Executive 28 Years 51 Mr Lim is responsible for the business strategy and planning and business 380,000,000 Hock Eng Chairman administration, day-to-day operations, including overseeing the setting up process of new stores. He has been a director with the Group since 1983. 27.5%

Mr Lim Managing 17 Years 46 Mr Lim is responsible for the Group’s operations, including overseeing the 380,000,000 Hock Leng Director seafood business, and aligning the Group’s business to consumer trends. He was one of the founders of CMM Marketing, and has been a director with the 27.5% Group since 1994.

Mr Tan Ling Executive 41 Years 72 Mr Tan is responsible for administration and implementation of the Group’s N/A San Director policies and strategies and evaluation of new growth areas. He spearheaded the restructuring of the Group and oversaw the expansion of Sheng Siong’s store network. Prior to joining the Group, Mr Tan founded and served as executive chairman of PSC Corporation, a SGX-listed company engaged in the supply o f consumer essentials.

Mr Goh, Lead N/A 60 Mr Goh is the CEO of Sino-Sing Center Pte Ltd. And Seacare Education Pte N/A Yeow Tin Independe Ltd., an independent director of Juken Technology Limited, a non-executive nt Director director of Oakwell Engineering Limited, and an independent director of Lereno Bio-Chem Ltd and Vicom Ltd.

Mr Jong Independe N/A 38 Mr Jong is currently the CFO of Youcan Foods International Ltd., listed on N/A ,Voon Hoo nt Director SGX-ST. He is a Certified Public Accountant and a non-practicing member of the Institute Certified Public Accountants of Singapore, where he serves on the CFO’s Committee of the Institute of Certified Public Accountants of Singapore.

Mr Francis, Independe N/A 45 Mr Lee is currently the director of Wise Alliance Investments Ltd., and a N/A Lee, Fook nt Director non-independent, non-executive director of Man Wah Holdings Ltd. He is a Wah Certified Public Accountant and a non-practicing member of the Institute Certified Public Accountants of Singapore.

Mr Lee, Non- N/A 43 Mr Lee is currently a partner in Shook Lin & Bok LLP’s corporate finance N/A Teck Leng, Executive and international finance practice and a partner in the firm’s China practice. Robson Director

Appendix 10. NUS Student Research Preliminary Survey on Consumers’ Grocery Shopping Habits and Perceptions

NUS Student Research preliminary survey results on consumer perception on grocery retailers in Singapore

Prices 3.5

2.5

Shopping 2 Quality Environment 1.5

Convenience Product Range

Cold Storage NTUC Sheng Siong Shop N Save

Source: NUS Student Research Survey

• Prices: With the global economy slowing down in the next few years, price will be an increasingly important factor as more consumers trade down to cut costs, as was the case during the Global Financial Crisis in 2008. In addition, Nielsen research suggests that Singaporeans are the second most price-sensitive consumers in the region and are becoming increasingly value-conscious. • Quality: With regards to food products, quality may be an important decision-making aspect for some customers. • Product Range: Product offerings can be a key distinguishing factor should competitors not carry certain items that customers desire. • Convenience: Convenience and proximity to customers are paramount, given the shopping patterns of a typical customer – frequent, regular trips and the purchase of large and/or heavy items. Our survey indicates that convenience is the top factor in consumers’ choice of grocery retailer. • Shopping Environment: The overall shopping experience can be used to attract customers who place additional value on non-price factors.

Location & low prices are the 2 most How frequently do consumers visit On average, each household spends less important features consumers look each supermarket in a week? than $200 on groceries every week... out for in supermarkets

Close to where you live 40% 37% Low prices Shop n Save 35% Quality of fresh … 30% 26% 24% Wide range of products Sheng Siong 25% Short queuing time 20% Offers several brands … 15% NTUC Fairprice 10% Comfortable … 10% Long operating hours 5% 3% Cold Storage Availability of house … 0%

Sells live seafood 0 1 2 3 4 5

Source: NUS Student Research Survey Source: NUS Student Research Survey Source: NUS Student Research Survey

More than half of consumers’ total food grocery expenditure …and 58% of consumers prefer to get their fresh produce from goes to fresh food… wet market. 3%

45.2% 31% 58% 54.8%

3% Fresh food (includes seafood, poultry, meat, vegetables, fruits) Wet Market Cold Storage NTUC Fairprice Sheng Siong Processed food ( includes ham, deli, cereals, rice, Shop n Save seasoning, oil, frozen food, canned food) Source: NUS Student Research Survey Source: NUS Student Research Survey

Those who prefer to get their fresh produce from wet markets cites FRESH AND CHEAP as the top 2 reasons,

Source: NUS Student Research Survey

While consumers chose supermarkets over wet markets because they are CONVENIENT AND NEAR.

Source: NUS Student Research Survey

Appendix 11. Competitor outlet analysis Methodology

In our analysis we chose to segment the market based on geographic location, closely following the boundaries set out by the Urban Redevelopment Authority’s Masterplan 2008. Proximity is a very important factor affecting the performance of a supermarket/hypermarket as people who stay in a particular area will largely buy from the stores in that particular area.

Using data from Singstat, company websites and URA maps, we are able to construct a comparative matrix showing the population in each area and the approximate income distribution of the population. We the calculated how many people in the area earned less than the median income of SGD3000 as we expect these people to be Sheng Siong’s target market.

However, as the income information is only provided for residents above 15 years of age, we used the data to calculate the percentage of residents earning below median income. Thereafter, we applied this ratio to the total number of people in each area to get an estimate of the number of people who are dependent on, or are earning less than median income. The rationale behind extrapolating the data is to account for children below the age of 15 who will also affect consumption patterns.

Thereafter, we divided the target market by the number of major supermarket players there are in the region to obtain the key statistic of people earning below median income per supermarket. We use this as a proxy to calculate the competitiveness of the geographic location for Sheng Siong’s target market. By being in areas with large amounts of people (earning below median income) per supermarket, there will be more consumers for Sheng Siong to reach out to.

Singapore population segmented by income and district

Belo w $1,000 - $1,500 - $2,000 - $2,500 - $3,000 - $4,000 - $5,000 - $6,000 - $7,000 - $8,000 & Population below Population above Planning Area Total $1,000 $1,499 $1,999 $2,499 $2,999 $3,999 $4,999 $5,999 $6,999 $7,999 Over median median Ang Mo Kio 91,070 12,885 10,613 10,354 9,146 8,156 11,996 7,652 5,223 3,341 2,364 9,340 51,154 39,916 Bedok 147,667 18,538 14,931 15,419 14,218 11,664 18,523 12,131 9,322 6,026 4,335 22,561 74,770 72,898 Bishan 46,623 4,494 3,340 3,828 3,569 3,540 6,382 4,424 3,654 2,781 1,920 8,690 18,771 27,851 Bukit Batok 75,001 8,226 7,205 7,533 7,414 6,412 10,458 6,926 4,882 3,151 2,307 10,488 36,790 38,212 Bukit Merah 78,447 12,476 9,034 7,722 7,248 5,720 10,435 7,273 5,117 3,432 2,404 7,585 42,200 36,246 Bukit Panjang 66,005 7,905 6,990 7,208 6,663 6,254 9,509 6,183 4,502 2,633 1,794 6,363 35,020 30,984 Bukit Timah 32,557 1,906 1,051 855 1,532 1,317 2,811 2,178 2,253 1,892 1,624 15,138 6,661 25,896 Changi 1,180 135 97 82 51 64 277 271 75 43 6 77 429 749 Choa Chu Kang 87,543 9,153 7,834 8,889 9,160 8,117 13,945 9,136 6,436 3,798 2,972 8,102 43,153 44,389 Clementi 46,003 5,235 3,882 4,210 4,507 3,677 6,311 4,364 3,216 2,202 1,396 7,003 21,511 24,492 Downtown Core 1,970 241 185 197 103 110 316 110 172 106 72 357 836 1,133 Geylang 61,514 8,950 7,714 7,116 6,333 5,226 8,473 4,989 3,579 2,116 1,569 5,449 35,339 26,175 Hougang 110,594 14,177 12,418 12,814 11,669 9,872 15,341 9,789 6,574 4,262 2,821 10,857 60,950 49,644 Jurong East 44,946 5,524 4,546 4,915 4,867 4,292 6,562 4,252 2,897 1,768 1,310 4,013 24,144 20,802 Jurong West 138,273 16,822 14,560 16,136 16,328 14,140 22,063 13,624 8,426 5,075 3,252 7,845 77,986 60,285 Kallang 50,022 8,022 5,917 5,193 4,986 4,048 6,053 3,748 2,855 1,803 1,185 6,210 28,166 21,854 Mandai 801 75 47 25 38 12 119 59 52 98 78 199 197 605 Marine Parade 21,204 2,055 1,364 1,296 1,501 1,265 2,375 1,769 1,509 1,170 783 6,116 7,481 13,722 Newt o n 2,677 149 90 66 138 105 193 147 213 102 85 1,389 548 2,129 Novena 22,673 2,345 1,943 1,761 1,734 1,496 2,653 1,770 1,527 1,035 797 5,615 9,279 13,397 Out ram 8,441 2,180 1,113 927 733 559 922 556 413 226 164 648 5,512 2,929 Pasir Ris 65,991 5,917 5,106 6,167 6,236 5,893 9,553 7,139 4,954 3,444 2,429 9,152 29,319 36,671 Punggol 31,603 2,133 2,130 2,819 3,071 3,077 5,347 3,963 2,817 1,854 1,246 3,146 13,230 18,373 Queenstown 46,307 6,017 4,608 4,324 3,975 3,597 5,977 3,983 3,140 2,106 1,581 6,999 22,521 23,786 River Valley 3,956 129 81 93 204 211 350 294 279 235 105 1,975 718 3,238 Rochor 7,690 985 885 776 875 719 1,138 662 400 291 193 766 4,240 3,450 Sembawang 37,948 3,619 3,529 3,941 3,914 3,788 6,062 4,525 2,625 1,753 1,323 2,869 18,791 19,157 Sengkang 88,047 8,032 7,785 8,797 9,134 7,967 14,010 10,001 7,009 4,598 3,115 7,599 41,715 46,332 Serangoon 62,322 6,703 5,260 5,013 5,490 4,868 8,375 5,592 4,308 2,885 2,263 11,565 27,334 34,988 Singapore River 900 41 - - 15 28 45 59 92 21 52 546 84 815 Tampines 131,051 15,164 13,550 14,541 14,065 12,054 19,489 12,382 8,446 5,294 3,527 12,539 69,374 61,677 Tanglin 8,025 355 124 117 311 277 685 557 588 297 302 4,412 1,184 6,841 Toa Payoh 62,125 9,241 6,720 6,385 6,104 5,097 8,974 5,492 3,643 2,354 1,693 6,423 33,547 28,579 Woodlands 121,587 14,744 14,123 16,315 14,642 12,262 18,280 11,187 7,076 3,907 2,757 6,293 72,086 49,500 Yishun 93,894 12,238 12,518 12,493 10,768 9,278 13,535 7,553 4,964 2,975 1,884 5,689 57,295 36,600 Others 1,384 117 21 33 46 64 110 125 85 81 68 635 281 1,104

Source: Singstat, URA maps

Appendix 12. Singapore supermarket store distribution sorted by district

Population Population Number of Shop Total below Cold Fairprice Fairprice Sheng Total below population below Planning Area Giant N Fairprice Prime Carrefour Population median Storage Finest Xtra Siong Supermarkets median median income per Save income (%) income supermarket

Bukit Panjang 128,734 53.1% 1 0 4 0 0 0 0 0 0 5 68,303 13,661 Jurong East 88,118 53.7% 0 1 0 2 0 0 0 0 1 4 47,335 11,834 Sengkang 167,054 47.4% 1 0 1 4 0 0 1 0 0 7 79,147 11,307 Toa Payoh 124,653 54.0% 0 0 3 2 0 0 1 0 0 6 67,311 11,218 Tampines 261,743 52.9% 1 1 3 6 1 0 1 0 0 13 138,558 10,658 Ang Mo Kio 179,297 56.2% 0 0 5 1 1 1 0 0 2 10 100,711 10,071 Jurong West 267,524 56.4% 0 1 2 5 1 1 2 0 3 15 150,886 10,059 Hougang 216,697 55.1% 1 0 3 4 1 1 2 0 0 12 119,425 9,952 Woodlands 245,109 59.3% 1 0 5 4 0 0 2 0 3 15 145,320 9,688 Choa Chu Kang 173,291 49.3% 0 1 1 4 0 0 2 0 1 9 85,422 9,491 Kallang 99,559 56.3% 1 0 1 2 0 0 1 0 1 6 56,061 9,344 Bukit Batok 144,198 49.1% 0 0 3 3 0 0 2 0 0 8 70,732 8,842 Yishun 185,214 61.0% 1 0 6 5 0 0 0 0 1 13 113,018 8,694 Pasir Ris 133,863 44.4% 0 0 2 3 0 0 0 0 2 7 59,475 8,496 Punggol 59,386 41.9% 0 0 0 1 0 0 1 0 1 3 24,861 8,287 Bedok 294,519 50.6% 3 0 5 6 0 0 2 0 3 19 149,126 7,849 Sembawang 72,732 49.5% 0 1 1 3 0 0 0 0 0 5 36,015 7,203 Bukit Merah 157,122 53.8% 2 1 3 6 0 0 0 0 0 12 84,524 7,044 Geylang 120,690 57.4% 0 0 3 8 0 0 0 0 0 11 69,335 6,303 Bishan 91,298 40.3% 0 0 1 2 2 0 0 0 1 6 36,758 6,126 Clementi 91,874 46.8% 2 0 1 2 1 0 0 0 2 8 42,960 5,370 Queenstown 98,502 48.6% 4 0 1 4 0 0 0 0 1 10 47,906 4,791 Serangoon 124,782 43.9% 1 0 3 4 2 1 0 0 1 12 54,729 4,561 Outram 19,859 65.3% 1 0 0 1 0 0 0 0 1 3 12,968 4,323 Novena 46,640 40.9% 3 0 0 4 0 0 0 0 0 7 19,085 2,726 Marine Parade 47,318 35.3% 2 1 3 0 1 0 0 0 0 7 16,695 2,385 Rochor 15,664 55.1% 2 0 1 1 0 0 0 0 1 5 8,637 1,727 Bukit Timah 70,314 20.5% 5 1 1 1 1 0 0 0 0 9 14,386 1,598 Tanglin 17,293 14.8% 2 0 0 0 0 0 0 0 0 2 2,551 1,276 Downtown Core 3,722 42.5% 2 0 0 0 0 0 0 1 0 3 1,580 527 Newton 6,242 20.5% 2 0 0 0 0 0 0 1 0 3 1,278 426 Changi 2,155 36.4% 1 0 0 1 0 0 0 0 0 2 785 392 Singapore River 2,000 9.3% 1 0 0 0 0 0 0 0 0 1 187 187 River Valley 8,206 18.1% 7 0 0 1 1 0 0 0 0 9 1,489 165 Others 4,484 20.3% 0 0 0 0 0 0 0 0 0 0 910 - Mandai 1,865 24.6% 0 0 0 0 0 0 0 0 0 0 458 -

*low cost retailers include Shop N Save, NTUC Fairprice, Prime and Sheng Siong

Source: Singstat, URA Maps, Company websites, NUS Student Research

Appendix 13. Comparison between traditional wet market and Sheng Siong’s Elias Wet Market

Traditional Wet Market SSG’s Elias Wet Market

Disorganized stalls demarcated by individual stall Color-coded display categorized by food type owners (e.g. Vegetable, fish, fruit etc.)

Wet, dirty floors. Non-air-conditioned. Comfortable shopping environment. Dry floors. Air-conditioned.

Informal Cash Payments Digitalized Payment Systems. Includes barcode scanners & digital cashier terminals

SSG’s non-traditional retail concepts a likely hit.

Diminishing Old World Appeal Best of Both Worlds

Slight price competitiveness and personal touch. Fresh-food offerings in a convenient, Continue to appeal to older generation comfortable environment likely to appeal to younger clients, and upper and middle class with rising disposable incomes

Appendix 14. Sheng Siong’s Live Seafood Procurement – Jurong Port Fishery

From primitive accounting methods used by traditional ….to Sheng Siong’s modern IT know-how wholesalers…

• Fresh seafood wholesale is a cash basis business. Wholesalers need to provide credit to both suppliers (fishermen) and buyers (wet market stall holders/restaurant owners) as they compete with other wholesalers to secure procurement and customers, as it is a highly fragmented market with limited product differentiation. Sheng Siong’s scale and strong cash flow from their retail operations provides them with the strong purchasing power in the fresh seafood wholesale industry. • Their supply chain efficiency is further complemented with the implementation of fresh food electronic tracking which streamlines the sorting and store dispatch process. Jong Fresh – middleman for Dairy Farm’s holdings’ seafood Sheng Siong’s sizeable presence at the Jurong Fishery Port range

• Due diligence research at Jurong Fishery Port has revealed that SSG is the only one among the top 3 industry players that has a fully integrated supply chain in its procurement and distribution of fresh seafood. • Both NTUC and Dairy Farm outsource these processes to third-party wholesalers, Big Foot Marketing & Jong Fresh respectively.

Fresh – but dead – fish for sale by the wholesaler … ..while Sheng Siong has tanks to seamlessly transfer live seafood from the ocean to their stores.

• Sheng Siong’s on-site presence allows better control and management of live and fresh seafood. Sheng Siong was the only operator in the entire port that has on-site tanks and water purification systems, which helps it store and transport higher margin live seafood (eg. clams, oysters, fishes, prawns).

Appendix 15. Store Lease Analysis

Year operations Outlet Tenant Expiry Notes commenced 1 Woodlands 301 Supermarket E Land Properties 2014 1995  2 Woodlands block 6A Supermarket HDB 2012 2001  3 Yishun 845 Supermarket HDB 2012 2008  4 Teck Whye Supermarket Japo 2014 2011 Expires in 2014 5 Woodlands Park Supermarket JYC-NCL 2014 2011 Expires in 2014 6 Chin Swee Supermarket HDB 2011 2002  7 The Verge Hypermarket Corwin Holding Pte. Ltd 2012 2003 Anchor tenant 8 McNair Supermarket HDB 2012 2004  9 Bedok North Supermarket HDB 2013 1988  10 Loyang Point Supermarket Gutherie FMC Pte. Ltd. 2012 1999 Long track record 11 Bedok Reservoir Market HDB 2012 2000  13 Serangoon North Supermarket JTC Corporation 2013 2004 Management confident 14 Upper changi Supermarket Heartland Retail Holdings Pte. Ltd. 2013 2007 Management confident 15 Punggol central Supermarket HDB 2012 2009  16 Elias Mall Market Stalls E Land Properties 2011 2011  17 Jurong west 554 Supermarket E Land Properties 2013 2003  Management 18 Superbowl Supermarket Superbowl Jurong Pte. Ltd. 2013 2003 expressed concern 19 Teban gardens Supermarket HDB 2013 2004  20 Clementi 720 Supermarket HDB 2012 2005  21 Clementi 352 Supermarket E Land Properties 2013 2007  22 Jurong west 7 Grocery Store Jian Yu Construction Pte. Ltd. 2013 2007 Management confident 23 Tanglin halt Supermarket HDB 2013 2007  24 Ang Mo Kio 122 Supermarket HDB 2012 1985  25 Ang Mo Kio 233 Supermarket E Land Properties 2013 2004  25 Thomson Imperial Court Supermarket Wellspring Investments Ltd. 2016 2011 Expire in 2016

Break down of lessors

20.00%

36.00%

44.00%

E Land Properties HDB

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