SUPER GROUP LTD
S10.SI
Super Group - Hopeful Of More Positive Trends
- We believe Super’s profitability may have bottomed out, with encouraging margins and a positive branded consumer revenue trend in 4Q15.
- However, as part of the latter is likely attributable to its new product launches in Singapore, Malaysia and China, we would be more upbeat on its outlook if this can be sustained into FY16.
- In the meantime, we upgrade Super to NEUTRAL (from Sell), with a SGD0.80 TP (from SGD0.67, 0% upside).
Expect a margin uptrend in 2016.
- Super’s gross margin of 39% for 4Q15 grew QoQ and YoY.
- We think this positive trend may be sustainable (although not at 39%), as a portion may be attributed to the completion and the smoother operation of its upstream ingredients manufacturing arm in 2014-2015.
New avenues of growth.
- In 4Q15, revenue for its core branded consumer segment dipped 1% YoY.
- More importantly, this may have arrested a declining trend that it has recorded since early 2015.
- We attribute this mainly to a very strong performance from its China market and the positive response to its Essenso MicroGround Coffee product launches in Singapore and Malaysia.
Effective tax rate.
- Part of the profit decline in FY15 can be attributed to the higher effective tax rate paid since 1Q15, as tax concessions expire.
- Going forward, YoY comparisons are likely to become more favourable.
- A key risk is a more sustained consumption slowdown in important ASEAN markets.
Upgrade to NEUTRAL.
- We keep our estimates mostly unchanged and introduce our FY18F numbers.
- With an improving margins profile, we believe profitability may have bottomed out.
- We peg our SGD0.80 TP to a higher P/E of 18x (from 15x) to account for this and upgrade the stock to NEUTRAL.
James Koh
RHB Invest
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http://www.rhbinvest.com.sg/
2016-02-25
RHB Invest
SGX Stock
Analyst Report
0.80
Up
0.67
