SUPER GROUP LTD
S10.SI
Super Group (SUPER SP) - Green Shoots
Profit Missed But More Silver Linings
- 4Q15 was below if we only consider full year earnings (-17% YoY) was 92% of our full-year forecast.
- But signs of better times are ahead. Growth has returned to most core markets and margins are buoyant again. That said, as the top-down picture remains soft, we forecast a more conservative 7%/13% growth in FY16 revenue/NP.
- Revenue growth should return as new product rollout continues and margins should stay high.
- Pegged to 23x FY16 P/E (0.5SD above mean), TP is now SGD1.10. Maintain BUY.
Signs of Growth Returning, With Better Margins
- Most of Super’s bigger Branded Consumer (BC) markets grew in 4Q.
- Markets accounting for a full 60% of BC revenue grew between 5% and 12%, except for Myanmar (18%) due to the weak kyat.
- Even Thailand saw growth without any benefits from new products.
- China was the biggest outperformer, up 40% YoY to 12% of BC sales.
- The higher gross margin could also be sustained at elevated levels now that expansion-related depreciation has normalised.
New Products For More Markets, China Rising
- Market reception to the new products (Essenso microground coffee and Owl Kopitiam Roast) is highly encouraging.
- 75% of growth in Singapore and Malaysia came from sell-through/re-orders rather than new stocking.
- More markets will get them in 2016, along with more new products in other categories such as tea and cereals.
- China should continue to do well, driven by surging offline and online sales.
Risks Remain But Salved By Strategy
- That said, the top-down picture remains soft. Challenging economic conditions could still affect demand and consumer sentiment in 2016.
- Key raw materials have softened but they could bounce back.
- Competition can be expected to remain keen. However, management reiterated it is familiar with the challenges and will stay the course with its “Branding, Innovation and Diversify” strategy.
Gregory Yap
Maybank Kim Eng
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http://www.maybank-ke.com.sg/
2016-02-24
Maybank Kim Eng
SGX Stock
Analyst Report
1.10
Down
1.42
