Towards Financial Freedom
Singapore Company Focus - Super Group Ltd
Buy when valuations correct
- Counter re-rated on potential to be entrenched Southeast Asian coffee player over the medium term.
- Although bigger and stronger, Super's positive prospects are already priced in for the next 12 months
- Counter trading at +1 std dev above historical mean and trades at 1.15x PEG
- Maintain HOLD, revised TP to S$2.18. Will turn buyers should price correct by c.12%.
Re-rated on potential to be an entrenched player. Super's stock price has performed well YTD (+58%), which we believe is due to its potential to become an established, branded FMCG (fast moving consumer goods) company over the medium term. We forecast a FY12-14F CAGR of 13% which is driven by further penetration opportunities for branded consumer segment in Thailand's and Malaysia's Northern regions. For the ingredient segment, we believe existing production lines should see steady utilisation and volume production over the next few years.
Positives already priced in. While there are opportunities for growth over the medium term, we believe these are already priced in for now, on the back of a 10% projected growth in FY13F. It is trading at c.15.3x FY13F earnings, or +1 std deviation above its historical trading average, and at a PEG of c.1.15x.
Maintain HOLD, raised TP S$2.18; turn buyers at lower price. We raise our valuation peg on the counter to 16x on FY13F, which is in line with peers' average, given its larger size currently and stronger business model. We also raise our gross margin outlook to >34% in FY12F/FY13F, resulting in an earnings revision of 4.3%/ 2.6%. We raise our TP to S$2.18 (from S$1.88). However, we maintain a HOLD call, due to the limited upside of 4%. We will turn buyers at c.S$1.90, barring changes to our forecasts.
Source: DBSV - 5 September 2012
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