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DBS Vickers 2015-08-12: Super Group Ltd - 2Q15 Results; No signs of recovery. Maintain HOLD.

SUPER GROUP LTD S10.SI

No signs of recovery 


 2Q15 below expectations as revenue and operating margins disappoint.
 Hopes of recovery may be delayed to after 2H15.
 Cut FY15-17F earnings by 14-16%.
 Maintain HOLD with lower S$1.05 TP.


Below expectations. 

  • Revenue and margins were below expectations. 2Q15 revenue (S$126m, -5% y-o-y) and earnings (S$10.5m, -30%) were below our estimates. 
  • Sales were weak across both business segments, affected by Philippines and China markets. 
  • Margins were also below expectations on higher than expected costs. 
  • 1H15 earnings formed just 38% of our initial FY15F earnings. 
  • An interim DPS of 1 Scts was declared. 


Sales affected by Philippines and China. 

  • Branded consumer sales were dragged by streamlining of product portfolio in the Philippines even though sales in core markets of Myanmar and Thailand picked up. 
  • Super has reduced the number of SKUs in the Philippines and will be concentrating on a few key products categories going forward. 
  • Food ingredients sales declined mainly due to lower sales in Philippines and China. 


Expect delayed recovery. 

  • We believe earnings recovery momentum will be delayed beyond 2H15F. 
  • Even though new products have been lined up for launch going forward, regional consumer sentiment remains tepid. 
  • We are hence not anticipating strong earnings recovery in the coming quarters. 
  • Furthermore, there could be earnings risk in 3Q15 from recent floods in Myanmar that may have disrupted existing distribution channels. 
  • El Nino remains a longer term threat to margins. 


Cut FY15-17F earnings by 14-16%; maintain muted 7-8% earnings growth for FY16F and FY17F. 

  • We lower our FY15-17F earnings forecast to account for disappointing earnings in 1H15. 
  • We lowered our FY15F revenue expectations by 5.5% and earnings by 14% on higher opex and lower margins. Hence, earnings growth is expected to be muted at 7-8% in FY15-17F. 


Maintain HOLD with lower S$1.05 TP. 

  • Post earnings revision, we lower our TP based on 20x FY16F EPS (in line with its average valuation over the last four years) from S$1.25 to S$1.05. 
  • Maintain HOLD.



Alfie YEO | Andy SIM CFA | http://www.dbsvickers.com/ DBS Vickers Securities 2015-08-12
HOLD Maintain HOLD 1.05 Down 1.25


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