Why Sheng Siong lowered its payouts

It could be building up a bigger cash buffer.

Sheng Siong Group could be preparing its war chest as it faces heightened competition from both brick-and-mortar supermarkets and e-commerce giants Amazon and RedMart.

According to UOB Kay Hian analyst Nicholas Leow, this might very well be the reason why the supermarket giant has declared a dividend of 1.55 S-cents per share in the quarter.

This is compared to the 1.90 S-cents per share it declared last year.

"We have lowered our payout assumption for 2017-19 from 90% to 70% to reflect the cut in dividends and consider this as a prudent move from the conservative Sheng Siong management to build up a bigger cash buffer in the face of heightened competition," the analyst noted.

To recall, Sheng Siong's revenue grew 6.8% higher, thanks to new store openings and an improvement in same stores sales growth of 0.9%.