SUPER GROUP LTD
S10.SI
Needs Super New Products
- Super Group’s 2Q15 results were below our expectations, despite having already earlier forewarned about the keen competition and higher effective tax rates.
- We lower our TP to SGD0.77 (from SGD0.90, 19% downside) and maintain SELL.
- In 2H15, we believe headwinds from weak consumption spending and regional currencies will remain in play.
- A breakthrough new product launch is needed to revitalise sales.
2Q15 hit by lower margins and higher taxes.
- Super Group’s recurring net profit attributable came in at SGD10.8m, down 28% YoY against a revenue decline of 5%.
- This was mainly due to high operating costs and higher effective tax rates.
- The latter was a function of expiry of tax incentives (which came within our expectations) and a withholding tax on overseas remittance (a negative surprise).
Branded consumer segment needs a new product launch.
- Revenue from this segment remains lacklustre, down 4% YoY partly due to weaker regional currencies.
- Competition remains keen and we believe Super Group needs to have a breakthrough new product launch in 2H15/1H16 to revitalize flagging sales, especially in mature markets such as Singapore and Malaysia.
Not helped by weaker food ingredients sales in China.
- Food ingredients sales also declined 5% YoY, led by significantly lower sales of non-dairy creamer in China as demand for end-products like milk tea saw weak volume.
- Without a strong sell-through of its new premium products such as nutritional oil powders materializing, Super Group is experiencing higher costs from the build-out of these capacities.
Maintain SELL.
- We cut our FY15F-17F earnings estimates by 14-15%, but still see potential near-term earnings risks in weakening consumption and softening regional currencies.
- As such, our new TP of SGD0.77 remains pegged to 15x FY15F P/E, as we anticipate the potential impact of a new product launch in 2H15.
James Koh | http://www.rhbgroub.com/ RHB Securities 2015-08-12
0.77
Down
0.90
