For one, there is a surprise spike in labour costs of $4.6 million in 2QFY2023 versus $1.5 million increase in 1QFY2023 ended March. Sheng Siong clarified that this was due to significant salary increases in order to retain and attract workers, instead of one-off bonus payout.
DBS Group Research analysts have downgraded Sheng Siong (SGX:OV8
) to “hold” with a lower target price of $1.76 on possible near-term headwinds, such as slower store growth, high labour cost and sticky elevated utility cost.
This follows the company’s 2QFY2023 ended June results announcement. Based on the recent analysts briefing, the DBS analysts believe they have been too overly optimistic on their earlier FY2023/FY2024 assumptions.
