Insider moves: Mondrian trims stake in Sheng Siong while Lum Chang MD raises stake
Mondrian Investment Partners, the second largest shareholder of Sheng Siong Group, has cut its stake in the supermarket chain. In a Singapore Exchange filing dated Oct 30, the London-based fund manager sold 885,100 Sheng Siong shares on the open market, collecting proceeds of just over $1.45 million. This works out to an average selling price of $1.63 per share.
However, Mondrian remains a substantial shareholder. It still holds nearly 90.18 million shares, equivalent to a stake of 5.998%, down slightly from 6.057% earlier. The Lim family, with nearly 50% stake, remains the controlling and largest shareholders of the company.
Mondrian first invested in the company back in May 2018 when it acquired a 6.58% stake in Sheng Siong by paying the controlling Lim family $99.99 million for 99 million shares, which works out to $1.01 each.
Sheng Siong shares are enjoying a good run as people stock up on essential items amid the Covid-19 pandemic. Year to date, its share price has surged by 50%.
For its most recent 3Q ended Sept 30, it reported earnings of $31.8 million, up 54.4% y-o-y. Revenue in the same period increased by 28.9% y-o-y to $327.3 million. However, compared to the preceding 2Q which saw an “elevated” demand because of Covid-19 induced buying, earnings growth is tapering off.
In its 3Q earnings commentary, Sheng Siong cautions that demand had peaked in April and May. And with “circuit breaker” measures partially lifted, demand might have stabilised as seen in the most recent 3Q numbers.
“Competition in the supermarket industry is expected to remain keen and challenging among traditional brick and mortar operators and e-commerce platforms, which have gained a larger share since the onset of Covid-19,” says Sheng Siong.
Fair value losses
Lum Chang Holdings’ managing director David Lum Kok Seng bought some shares from the market recently. On Nov 10, he acquired 52,000 shares for $18,200. This follows three earlier acquisitions totalling 677,100 shares at around 35 cents each.
The shares were bought via an entity called Beverian Holdings, in which Lum holds a deemed interest of more than 50%. Lum’s in direct stake is now more than 71.4 million shares, or 18.956%. In addition, he has a direct stake of just over 10.9 million shares, or 2.904%, giving him a total interest of just over 82.3 million shares, or 21.86%.
On Aug 27, Lum Chang reported revenue of $322.7 million in FY2020 ended June 30, up 34% y-o-y as the company was able to book higher revenue from ongoing construction projects in 1HFY2020 ended Dec 31 before most sites were told to stop work because of Covid-19.
However, the company booked fair value losses of $17.3 million on a freehold property in the UK and a leasehold property here in Singapore. As a result, it reported a full-year loss of $2.1 million for FY2020 from earnings of $23.3 million in FY2019.
During the year, Lum Chang cut the compensation to its directors by $4.6 million. As a result, administrative and general expenses fell to $25.1 million from $29.7 million in the preceding year.
“While the group’s construction arm succeeded in securing new assignments, bringing our current order book to $1.87 billion, we anticipate the operating environment will remain challenging, compounded by the added uncertainty of when our project sites will be fully operational and back to running at pre-Covid levels,” states the company in its earnings commentary.
Lum Chang announced a final dividend of one cent for FY2020, down from 1.5 cents paid for FY2019. As at June 30, the company’s net asset value was 68.18 cents, up slightly from 67.58 cents as at Jun 30, 2019.