The 30-year history of a supermarket chain

IN 30 years, Sheng Siong has grown from a single 1,650 sq ft outlet in Ang Mo Kio to a mini-empire of 37 stores around the island in Singapore.

The story began in 1985, when CEO Lim Hock Chee's father who owned a pig farm, found that he had excess meat.

Mr Lim, then 24, took the meat to a Savewell provision store in Ang Mo Kio and agreed to give the owner a cut of the sales in exchange for space to sell it.

Just as the excess stock was cleared, the store owner ran into financial problems. The government was also phasing out pig farms. With seed capital from their father, the Lim brothers took over the Ang Mo Kio store.

Over the years, the chain proved its worth by surviving and competing against the two larger established players, NTUC FairPrice and Dairy Farm International (Cold Storage and Giant), which have more than 100 outlets each.

Last year, some major global institutional brokers initiated coverage on Sheng Siong's stock. The timing coincided with a period when interest rates were extraordinarily low, and global investors were looking for defensive safe havens in which to park their money. Sheng Siong, with its high dividend payout ratios and free cash flow generation, hit the spot.

"Sheng Siong currently generates 40 per cent of its revenues from fresh food, which management is targeting to increase to 50 per cent over the next few years. Fresh foods have gross margins of 36 per cent versus 17 per cent for grocery - the product mix shift should help drive gross margin expansion, which should cushion near-term wage pressures," said JP Morgan, in its initiation report in April last year.

After Sheng Siong's announcement of its latest full-year results, Macquarie Research reiterated its "outperform" call with a target price of S$0.83.

"Within the Singapore consumer sector, we like Sheng Siong for its operational excellence," Macquarie said.

TIMELINE

1985: The first Sheng Siong outlet (1,650 sq ft) opens at Block 122, Ang Mo Kio Avenue 3. It was founded by the Lim brothers - Lim Hock Eng, Lim Hock Chee and Lim Hock Leng. Its sales revenue was about S$3,000 a day or almost S$1.1 million a year.

1988: A second outlet opens at Block 539, Bedok North Street 3. It moves to a larger site at Block 539A in 1999.

1995: The third outlet opens at Block 301, Woodlands Street 31.

1996-2005: Some 14 new stores open, most during the latter five years.

2007: Sheng Siong begins revamping its corporate structure, changing its logo and signboards. The Sheng Siong Show, a television variety show, makes its debut on MediaCorp Channel 8.

2008: Sheng Siong leapt to become a top three retailer in Singapore for the first time, based on yearly sales revenue. Since then, Sheng Siong has been one of the largest retailers in Singapore.

End-2009: There are now 23 Sheng Siong stores. The company announces plans to invest S$65 million to build a headquarters and distribution centre at Mandai Link Road, which has a built-up area of 537,000 sq ft, four times bigger than their old headquarters.

May 2011: The construction of Mandai Link headquarters is complete.

August 2011: Sheng Siong goes public at a price of 33 cents a share.

August 2014: Sheng Siong announces a proposed joint venture with Kunming LuChen Group to operate supermarkets in China.

September 2014: A share placement of 120 million shares at S$0.67 each is announced. The purpose is to fund site acquisitions for new store growth.

December 2014: Sheng Siong's annual sales revenue exceeded S$700 million, with 34 stores in its retail network.

April 2015: Sheng Siong hits a high of 80 cents a share, bringing its market capitalisation above S$1.2 billion. It has 35 stores in operation and has at least three more new stores in the pipeline.

READ MORE: Peer pressure works, at Sheng Siong