Sheng Siong is a household supermarket name. I had been avoiding it because I felt that their ethics could be improved and by that, I just felt that they were exploiting cheap labour, exploiting foreigners, selling low quality food, taking advantage of hawkers because they bidded for a hawker centre and turned it into a more expensive food court, etc.
Then I realised that all this while, Sheng Siong's share price had been rising non-stop. Do I hop on in support to earn some pocket money or do I hang on to my belief that because of their way they operate their business, they will get some "retribution" in time to come.
They have hit all the right notes. No debt. Dividend payout is almost 90%. Positive and growing cash flow. Marketing efforts are superb, analyst coverage is perfect (100% issue buy calls), every financial report, they report a bit about what they want to do and how they are achieving it. They expand their stores every year. They are even starting one in China, Kunming.
At $1.02 and 3.6 cents dividend, it translates to a yield of 3.5% which is decent.
It's tempting, but then I ask myself again whether they are exploilting cheap labour ($2.88M worth of Government Grant under Wage and Special Employment Credit Schemes, as reported in the Q2 2016 financial report). I asked myself whether it's their fault that they turned the hawker centre into a food court or is it the government's? While it could be the government's fault for publishing the tender, Sheng Siong had the choice to run it as a hawker centre or a food court and it chose to charge it as a food court.
Profit margins are growing. 10% is high. They could have paid these employees higher salaries. They could have sold better quality food to improve the well being and health of the lower income families who patronise their supermarkets. As a shareholder, I will like it, but I then ask myself whether it's morally right to take advantage of the lower income group that Sheng Siong targets and I can't bear to want to have a part in it.
It is also this very same moral principle that I also don't buy SMRT's shares. I don't own any Sheng Siong shares. I don't foresee myself buying it although it looks attractive. However, if you don't have this same moral dilemma that I have, just go forth and buy.
Well said. There's this saying that "investment is most prudent when it is most business-like", but I believe doing the right things and earning profits are not incompatible. That's why I will never invest in tobacco shares.
ReplyDeleteCurious to know what kind of low quality food are they selling? I don't shop there much, but their quality seems fine...
Actually I haven't stepped into Sheng Siong for a few years. I recently heard good reviews about their self-checkout (beats NTUC/Cold Storage's one) which was what got me interested to look into Sheng Siong again. The low quality food are those malaysian-made processed food (frozen food, tidbits, sauces, etc) with colouring, additives and preservatives. Maybe I should visit it again someday.
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