Super Group

UOBKayhian on 12 Aug 2014

FY14F PE (x): 22.4
FY15F PE (x): 20.5

Lacklustre 1H14, even after adjusting for exceptionals. Stripping out exceptional items
(investment gain of S$17.1m following the sale of Sun Resources in 1H13), Super’s
1H14 net profit of S$32.9m (-21% yoy) was below our and market expectations. The
lacklustre results were due to a combination of lower 1H14 sales (-5% yoy) as well as a
2.4ppt fall in EBITDA margin to 17.3%. The decline in turnover was a result of a 8%
yoy fall in branded consumer sales (weaker Thailand and Malaysia primarily due to
forex translation) whereas food ingredients posted a flat yoy sales. An interim dividend
of 1.0 cent/share was announced.
Cutting 2014-16 earnings estimates by 7-16%. We reduce 2014-16 net profit forecasts
by 7-16% by to work in lower turnover growth from branded consumer and higher
costs. In our new estimates, Super is expected to register a modest 3-year EPS CAGR
of 3% for 2014-16. Our revised earnings estimates are 12-13% below 2014-15
consensus. Key risks include: a) raw material prices, b) irrational competition in both FI
and BC markets, and c) execution risks in China.
Strong cash flows and Asia consumption proxy but wait for better entry levels. We stick
to our HOLD with a PE-based target price of S$1.55 (previously S$1.59), assuming
peers’ average of 22x 2015F PE (previously 20.2x as share prices of regional peers
have risen). We use PE rather than PEG, given an uncertain near-term outlook in
Super’s core markets such as Thailand and Indonesia. Entry price is S$1.32.