Towards Financial Freedom
Super - Cash Build-up Fuels Hopes Of Higher Payout
SUPER's 1Q13 recurring profit of SGD18.8m (+16% y-o-y, -9% q-o-q) was below our SGD23.1m projection, dampened by Myanmar concerns and rising costs. We lift our LT growth assumption on exciting growth in China and the Philippines, and raise its TP to SGD4.88. A better debtequity structure or a leveraged alternative given its cash-generative characteristics may also warrant a higher TP. Maintain NEUTRAL.
- 1Q13 branded product sales a letdown. Super Group (SUPER)'s overall revenue rose 9% y-o-y to SGD133m but its branded product sales ticked up by only 1% y-o-y to SGD94m (our estimate: SGD104m) due to: i) a ~10% decline in Myanmar as local distributors opted to stay light on inventory on riot concerns, and ii) a ~5% dip in Malaysia as the competition heated up. Nonetheless, ingredient sales were higher-thanexpected at SGD38m, or +33% y-o-y (our estimate: SGD31m), on the back of a better performance in Indonesia.
- Less than optimal product mix. Although its 1Q13 GPM widened by 3.2ppt y-o-y to 37.1% on lower raw material prices, it was below our 38.2% estimate due to a less optimal product mix. Coffee, sugar and palm oil input costs per tonne in 1Q13 were estimated at USD2,000, USD510 and USD720 (1Q12: USD1,920, USD630 and USD990) respectively. We note that the 1Q13 GPM at the branded and ingredient divisions stood at 35%-40% and 20%-30% respectively.
- Operating costs rise. Operating expenses rose to 19.1% of revenue (1Q12: 17.5%), driven by higher promotion expenses arising from its recent rebranding exercise and increasing staff costs.
- Maintain NEUTRAL. TP higher at SGD4.88. As we believe Myanmar distributors will re-stock on inventory in the coming quarters after riot concerns fade, we leave our FY13-FY14 estimates largely intact. We also lift our terminal growth assumption from 3% to 4.5% on promising growth from ingredient sales, as well as double-digit gains in China and Philippines in 1Q13. Given its strong cash generation and net SGD94m cash, our scenario analysis for a 20:80 debt-equity capital structure suggests that the stock's FV may find support at ~SGD6.00.
Source: RHB
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CS Tan
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
