Super Group - DBS Research 2015-11-13: Southeast Asia sales, margins disappoint

Super Group - DBS Research 2015-11-13: Southeast Asia sales, margins disappoint SUPER GROUP LTD S10.SI 

Super Group - Southeast Asia sales, margins disappoint 

  • 3Q15 results below expectations largely due to disappointing sales in Southeast Asia, lower margins. 
  • Regional macro outlook remains challenging but new product launches should mitigate its full impact. 
  • Revise FY15-17F earnings by 19-21%. 
  • Maintain HOLD with lower S$0.85 TP. 

Southeast SoutheastAsia disappoints, lower margins. 

  • Super reported a significantly weaker-than-expected set of results. Earnings of S$7.4m (-26% y-o-y) were well below our forecast. 
  • 9m15 earnings made up less than 60% of full-year earnings estimates. 
  • Revenue decline of -7% y-o-y (S$121m) was led by poorer sales into Southeast Asian markets (-14% y-o-y). 
  • Key contributors of the drag were Malaysia (weaker currency), Thailand and Philippines (no A&P activities) for Branded Consumer segment and Indonesia Food Ingredient sales (weak economy and currency). 
  • Gross margins were sequentially lower on higher direct depreciation from manufacturing facility expansion. 
  • Opex was also lower on marketing activities and higher depreciation. 

Outlook remains challenged by weaker ASEAN economies. 

  • We expect general consumption to be lacklustre on the back slower regional GDP growth. Our economics team has recently downgraded GDP growth in most ASEAN economies. The region is still marred by weaker currencies and poor consumer confidence. 
  • Consumer confidence is low particularly in Malaysia, Thailand and Indonesia. 
  • Nonetheless, with new product launches, we expect volume sales to at least pick up in the initial phases of each launch on channel stocking. That should support growth and mitigate consumption weakness in ASEAN. 

Maintain HOLD, lower TP to S$0.85 

  • We cut FY15-17F earnings by 19-21% after imputing in poorer-than-expected 3Q15 results. We maintain growth rates at 7-8%, and have factored in lower margins at the current cost structure. 
  • Our TP, based on 20x FY16F PE, is lowered to S$0.85. 
  • Maintain HOLD.

Alfie Yeo DBS Vickers | Andy Sim DBS Vickers | 2015-11-13
DBS Vickers SGX Stock Analyst Report HOLD Maintain HOLD 0.85 Down 1.05