Towards Financial Freedom
Super Group - A Lift From Strong Ingredient Sales
Super's recurring 4Q12 net profit of SGD20.5m (+29% y-o-y, +55% q-o-q) was above our SGD17.6m projection although the positive impact from better ingredients sales was partly offset by higher operating costs. In this update, we: i) raise our FY13 and FY14 earnings estimates by 5% and 11% respectively on higher sales assumptions, and ii) update our DCF model, projecting a 8% CAGR from FY15-FY18 and a 3% terminal growth rate, deriving a higher TP of SGD3.58. We see Super evolving into an established Asian consumer staple play with a geographical reach that spans from China to Indonesia. However, its current valuation at ~23x FY13 PE could limit its near-term upside. Maintain NEUTRAL.
Key 4Q12 highlights are as follows:
- 4Q12 revenue expanded by 29% y-o-y to SGD156m (our estimate: SGD132m) onbetter-than-expected ingredient sales, which grew by 50% to SGD67m (our estimate: SGD44m) from the acquisition of new clients in Thailand and Indonesia. Its annual production capacity has increased by 50,000 tonnes since 3Q11 to 125,000 tonnes in FY12, while utilisation was at ~65%.
- Branded product sales saw healthy 16% growth to SGD89m (our estimate: SGD88m)on broad-based growth from its key markets such as China, Myanmar and Thailand.
- GPM increased by 1.8ppt y-o-y to 34.3%, slightly below our 34.7% projection due tohigher mix of ingredient sales. GPM for branded and ingredient divisions are likely to be in line with our projected 38% and 26% respectively.
- Operating expenses, as a percentage to sales, declined by 1.1ppt to 18.7% due tobetter operating efficiency.
Introducing estimates for 1Q13-4Q13. We raise our FY13 and FY14 revenue forecasts by 7% and 10%, which lift our earnings estimates by 5% and 11% respectively. In addition, we are introducing our projections for 1Q13-4Q13. Earnings growth over the next two quarters is likely to be commendable at +43% y-o-y and +34% y-o-y to SGD23m and SGD22m respectively on favourable low raw material prices compared to a year ago.
Source: OSK
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