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Recent Sheng Siong Placement A Boon or Bane?
Tradeable, Tradeable Ideas | 11 September 2014
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By: Raymond Leung
Articles (142) Profile
  1. Sheng Siong announced that it will be placing out 120 million new shares at a price of $0.67 per share.
  2. The issue will dilute current shareholders’ positions in the stock by about 8.67 percent.
  3. Proceeds will be used for expansion in Singapore.

Analysts' updates on Sheng Siong

Last week, Sheng Siong Group (SSG) announced that it will be placing out 120 million new shares at the issue price of $0.67 per share. J.P. Morgan will be acting as the placement agent and underwriter for this issue.

The placement price will represent a discount of 5.37 percent to the average trading price of $0.708 on 3 September 2014 (the previous trading day before the announcement).

This issue will represent a dilution of 8.67 percent to the current issued share capital of the company. SSG will thus have an enlarged 1.5 billion shares. SSG is expected to raise a total of $79 million (net of fees) from this issue.

Capital raised from this issue will be used towards the group’s future plans for expansion in Singapore. Proceeds from this issue will lift the dwindling cash pile of the company. The company’s cash balances was expected to decrease to approximately $30 million after paying for the Tampines expansion.

Proceeds from the placement are expected to be used to fund Sheng Siong's expansion in Singapore

Net cash for SSG will be lifted to approximately $110 million after this issue. This will give the group ample cash to support its local expansion as well as retaining existing shop spaces from competition when leases expire.

Long term potential upside may come from the group’s plan to expand overseas; mainly in emerging markets. SSG is currently in a joint venture (JV) with Chinese partner, Kunming LuChen Group, to open supermarkets in China. The group is not expected to pump in additional cash into the JV in China this financial year.

Analysts from DBS Vickers Research reiterated its “Buy” call with a lowered price target of $0.78 (due to the dilution).

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Trained in fund management, Raymond is familiar with shares and various investment vehicles.

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Sheng Siong Group  1.140 -0.010 -0.87%   
Business: Co is a supermarket chain operator.

Insight: Apr-19, 1Q19 revenue rose 10.1% to $251.4m mainly ... Read More

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