Maybank Kim Eng 2015-08-12: Super Group Ltd - 2Q15 missed; Awaiting better news. Maintain BUY.

SUPER GROUP LTD S10.SI

Awaiting better news

2Q15 missed, dampened by weak currencies and consumer spending as well as higher tax rate.
Cut FY15-17 EPS by 8-10% but still expect better 2H15/FY16.
Maintain BUY on TP SGD1.42, 1SD to 16x mean.
Catalysts: potential M&A and dividends.

2Q15 results were below expectations.
Net profit fell 30% YoY, dampened by weak regional currencies and consumer spending in Asia as well as a higher-than-expected tax rate.

1H15 results formed 33% of FY15E. However, gross margin was maintained at 35- 36% and free cashflow recovered to positive levels as expansion projects ended last year.
Core markets Thailand, Myanmar and China continued to improve.
Underperforming markets were still Philippines, Malaysia and Eastern Europe.
Interim dividend was maintained at 1 SGD ct.

Currency challenges may impede near-term progress.
MYR has weakened to 2.84 against SGD from 2.71 at end-1Q, while Myanmar kyat has fallen 11% from 754 at end-1Q to 835 per SGD. These two markets account for over 30% of branded consumer sales.
Consumer sentiment in Malaysia is also weak, and new product launches there may be pushed out.
Trim FY15-17 EPS by 8-10%.
However, it will press ahead with other markets such as Thailand, Myanmar, Singapore and China.
We expect 2015 to improve slightly over 2014 and new premium-priced products launching in 2H15 should rejuvenate growth next year.
Raw material prices are in its favour and Super will stock up more. This should buffer margins.
Other than raw materials, Super may use its SGD72m net cash to embark on acquisitions. This is a more realistic expectation now compared to 2012-13.
In addition, with a turnaround in FCF to positive levels with lower capex, it should beef up final dividends.
Maintain BUY for potentially stronger turnaround in 2015, as well as M&A and dividend catalysts. Super yields 4.7% at this level.
TP lowered to SGD1.42 on lower EPS, at 1SD to historical mean of 16x.

Gregory Yap | http://www.maybank-ke.com.sg/ Maybank KE 2015-08-12

BUY Maintain BUY 1.42 Down 1.57