3Q12 numbers blew past market expectations. This set of results was significantly above market expectations, justifying our lofty estimates for FY12. We eagerly anticipate Super’s rebranding exercise which will be rolled out early next year, which could possibly bring about ASP and sales upside. A growing company in the right space and right markets, we see more legs to share price upside.

Broad-based profit growth. Excluding SGD1m from non-core profit (earlier legacy property development project), 3Q12 recurring net profit was up 64% yoy while 9M12 was up 44%. This was driven by 1) Continued growth for branded consumer segment 2) Ramped up capacity for ingredients sale and 3) Stable and improving margins

Better growth momentum for BC in 2H. As we had earlier highlighted, branded consumer revenue showed much better growth momentum this quarter (up19% yoy), as sales reverted back to a normalized seasonality. We expect that to continue into the next quarter, given that last year saw negative effect from the Thailand floods, which is one of Super’s biggest markets. Interestingly, Super recently opened a Owl Café, which taps on the Owl brand’s heritage. More may be opened, but will be used primarily for driving product sales.

Becoming a more complete ingredient supplier. This segment saw a 29% yoy sales increase as the increased non-dairy creamer capacity (double of last year) kicks in. Over the next few quarters, Super will be have completed the addition of Freeze-dried coffee (1,500 mtpa) and Botanical Herbal Extract (3,000 mtpa) to its arsenal. Not only does this diversify its portfolio, they are also higher-value add ingredients which has higher barriers of entry.

Reiterate BUY with a higher TP. We adjust our FY13-FY14F estimates upward by 5% to account for healthier margins in light of benign raw material prices. Despite its growth prospects and market share, Super still trades at a discount to regional peers. We reiterate BUY, with a higher TP of SGD3.75, now pegged to 25x FY13F. We also continue to expect heightened M&A activity within this space to be a rerating catalyst.

Source: Maybank Kim Eng Research - 09 Nov 2012