Super Group

Kim Eng on 11 Apr 2013

ASEAN 3-in-1 coffee powerhouse. Super is an integrated player in the 3-in-1 coffee space, involved from manufacturing to distribution. Under its own brands, it has a market leading position in the fast-growing ASEAN region. Further fueling this growth is its ingredients sale segment, where it sells to third-party companies.

We like its major rebranding drive. Super rolled out a major rebranding drive early this year. We believe it will resonate with consumers in its market, especially the younger segment. The benefits will be seen over the longer-term in market share gains and ASP, but we are optimistic of an immediate tangible uplift to sales volume, driven by novelty factor and the accompanying advertising & promotion drive. We also see strong growth potential in new markets such as Indonesia and Philippines.

Market share and distribution reach makes it an M&A target. We believe these characteristics present Super as an attractive M&A target for other F&B players. Interested parties could be F&B companies in other countries looking to enter ASEAN, in which case Super would be an immediate foothold. Other interested acquirers could be existing players looking to consolidate market share, in which case buying Super would likely make it a dominant player.

Shareholding structure may open it up for bids. Founding family Teo/ Te has a 39% stake in Super, and is the largest block. SGX-listed Yeo Hiap Seng’s 12% shareholding in Super is a non-core investment which they could eventually seek to divest to another strategic shareholder. With several substantial shareholders in the mix, this could put forth an interesting tussle for control down the road, and could unlock value for shareholders.

Nowhere near benchmark buy-out valuation. In a buy-out scenario, we think Kirin’s SGD2.7b offer for the food unit of a major listed conglomerate, which is growing at a slower pace, would be a very close benchmark. We estimate Kirin’s offer represents around 40x PER, which would imply an offer of SGD6.40 for Super. Our current TP of SGD4.80 is based on 30x FY13F, which implies 25% upside from current level. Reiterate BUY.