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
1.05
Down
1.25
