Sheng Siong bets on $520m warehouse project, reaffirms 70% dividend payout

It outlines expansion and cash strategy whilst AGM highlights governance pressure.

Sheng Siong Group said it will continue to rely on internal cash generation, long-term infrastructure investment, and a dividend payout policy of around 70%, as it outlined plans for a $520m distribution centre and defended executive remuneration ahead of its annual general meeting.

It said the new distribution centre and warehouse project, scheduled between 2026 and 2030, will support at least 120 stores, up from about 50 stores under the current system.

The facility will include automation systems such as robotics and automated storage and retrieval systems, and is intended to improve supply chain efficiency and support future expansion.

The group said it continues to prioritise financial flexibility and liquidity, maintaining a strong cash position largely placed in fixed deposits.

It added that this supports planned capital expenditure, including store expansion and infrastructure investment, whilst reducing exposure to refinancing and interest rate risks.

Sheng Siong said it remains open to prudent use of debt in future but has not determined a funding mix for its planned investments, adding that it continues to evaluate capital efficiency and tax incentives, including capital allowances and government schemes.

The company said gross margin reached a record 31.3% in 2025, driven by a higher share of fresh produce, direct sourcing, supply chain efficiency, and cost management.

It said further improvement remains possible, but reiterated that it prioritises competitiveness and value for customers over margin expansion.

On external conditions, Sheng Siong said geopolitical tensions, including the conflict in the Middle East, have contributed to higher fuel, fertiliser, packaging, and freight costs.

It said it does not expect material supply disruptions and continues to manage procurement through diversified sourcing across regions.

The group said it will maintain its dividend payout ratio of around 70%, without signalling changes to capital return policy, including special dividends or a larger share buyback programme.

It added that it opened 12 stores in 2025 and has secured three new supermarket leases for 2026, with additional HDB tenders pending.

Expansion will continue to focus on Singapore, including heartland and selected mall locations, based on rent, catchment, and site availability.

Sheng Siong said its China operations in Kunming remain a small part of the business, with six stores operating in a competitive market.

The segment is self-sustaining and will be retained, whilst management focus remains on Singapore as the core market.

The group said it remains open to overseas expansion but has not identified near-term plans for large developed markets, citing competition intensity and execution risk.

On executive remuneration, shareholders questioned pay levels for executive directors, reported at about $24m in total for three executives, or around $8m each, and the structure of variable bonuses.

Sheng Siong said executive pay comprises fixed salary, variable incentives, and benefits, with bonuses linked to financial and non-financial performance.

It added that the variable component increases with seniority to reflect responsibility and contribution to group performance.

The company said the remuneration framework is reviewed annually by the remuneration committee, which considers financial results, operational performance, and sustainability-related factors.

It added that strong performance in FY2025, including record revenue, profit, and store expansion, underpinned executive compensation outcomes.

Sheng Siong also pointed to external recognition in 2025, including awards for return on equity, customer service, employer branding, and corporate responsibility, as part of its performance assessment.