Super Group

UOBKayhian on 11 Nov 2014

FY14F PE (x): 21.0
FY15F PE (x): 19.3
Weak 9M14 as costs remain elevated. Excluding the exceptional gain (investment gain
of S$17.1m following the sales of Sun Resources in 1H13), the group’s 9MFY14 net
profit of S$43m (-29% yoy) was disappointing. The poor results were due to continued
weak sales (-4% yoy) and a 2.6ppt fall in gross margin to 35.0%. The decline in turnover
resulted from a 6% yoy fall in 3Q14 branded consumer sales (weaker Singapore/the
Philippines offset a recovery in Thailand/Malaysia) whereas food ingredients enjoyed a
3% yoy rise.
Look forward to a better 2015. Going forward, we expect 2015 to recover as branded
consumer sales in key markets recover further (Thailand, Myanmar) or stabilise (such as
Singapore and the Philippines). In the food ingredient segment, management plans to
roll out premium products such as botanical herbal extracts (BHE) and nutritional oil
powders (for infant milk) to differentiate itself from competitors.
Buy as weak 2014 has been priced in; look ahead to 2015. Maintain BUY with a PEbased
target price of S$1.23 (previously S$1.55), which is based on its regional peers
valuation. We believe 2014’s poor performance is due to a “transition” year and one-offs
(such as the relocation of its packaging plant) and we expect an earnings recovery in
2015. This should be on the back of new product launches such as its botanical herbal
extracts and nutritional oil powders picking up momentum. In addition, we believe
selective core markets such as Singapore, Thailand should also see a recovery in
branded consumer sales.