$Sheng Siong(OV8.SG)As one of the few companies in the supermarket industry that are listed on the local stock exchange, Sheng Siong is a defensive stock. Demand for groceries and necessities is quite inelastic and sales are largely on cash basis so it has a good amount of cash on hand. It has been a reliable payer of dividends since its IPO in 2011.

Sheng Siong is something of a miracle story, having been able to compete sucessfully against its larger and more established rival Fairprice (which is a cooperative and hence not publicly traded) through price leadership and service with a human touch. Its strategy of opening many stores in the heartlands, eschewing expensive renovations and improving operational efficiency to keep costs down have helped it to win over loyal customers in many suburban areas. Sheng Siong is also known to reward its employees generously when the company performs well.

While the price-to-earnings ratio of 31.4 is high and the dividend yield of 2.06% is low, the amount of capital appreciation has been staggering and the bullish momentum does not seem to be over. In the past few years, revenue and profits were given a further boost due to the issue of CDC supermarket vouchers by the government. The ongoing EQDP is another tailwind as the appointed fund managers look for suitable small to mid-cap companies to invest in.