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Goodbye Sheng Siong

Sheng Siong Logo

I sold Sheng Siong today. No, there is no bad news about Sheng Siong. I sold it for other reasons which I shall detail it later below. Profit gain was about 68% excluding the dividends collected over the years.

Sheng Siong is an excellent growth stock. Look at how much the stock price has grown over the years.

sheng-siong-share-price-21-oct-2016

 

Let me go into the reasons why I sold Sheng Siong

1. Contented with Profit Gains

Well, you can never predict the highest price to sell. Basically, I am contended with the profits gained and thus I decided to sell off the stock. This is to prevent loss of opportunity cost in the event stock prices start to fall. When I meant by opportunity cost, it means I can take the cash from the sale and invest in other company for further growth.

2. Risk in Entry to China Market

We know that Sheng Siong has ventured and invested into the China market by going into a joint venture (JV) with Kunming LuChen Group to operate supermarkets in China. It is a good form of diversification as personally I feel Singapore is very much saturated by too many supermarket chains such as Giant, Dairy Farm and NTUC Fairprice. The opening of Sheng Siong stores in China is likely to happen after Chinese New Year and its going to miss the boat from the Chinese New Year sales in China.

3. Labour Intensive Business

With more stores opening, there is more reliance on man power. Although I mentioned how impressive the management of Sheng Siong is to deploy automated check out machines, I will think this is difficult to implement and adopt by the people in China.

Conclusion

After some thoughts about the above, I decided to divest Sheng Siong. I may jump onto the bandwagon again if Sheng Siong expansion into China is successful in the future.

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