Super Group - DBS Research 2016-03-23: Earnings growth priced in

Super Group - DBS Research 2016-03-23: Earnings growth priced in SUPER GROUP LTD S10.SI 

Super Group - Earnings growth priced in 

  • Share price has surged c.40% since our last upgrade 
  • Growth prospects priced in 
  • Valuations now at 21.3x FY17F PE, in line with Asian F&B peers 
  • Downgrade to HOLD, TP S$0.97 based on FY17F PE 

Downgrade to HOLD. 

  • We downgrade SUPER to HOLD from BUY after our upgrade post 4Q15 results. 
  • Our TP of S$0.97 based on 20x FY17F earnings largely prices in earnings growth prospects for now. 
  • We have seen the stock surge by c.40% post our upgrade and at these levels, we believe upside is capped. 
  • Valuations are now at near average of its 4-year mean at 22.7x FY16F PE. 
  • Asian branded F&B peers are trading at 21x FY17F PE, in line with SUPER’s current FY17 valuations. 
  • We roll over our TP to 20x FY17F earnings, which gives rise to our TP of S$0.97. 

Earnings growth expected to be positive but not exceptional. 

  • We expect growth to be supported by better sales traction from new product launches and stable margins from low input prices. However, earnings growth projection is low at 4-6%. 
  • ASEAN’s outlook will be challenged by weak MYR, sluggish consumption in Thailand, weakening Peso, and lower GDP growth in Singapore. These will continue to dampen earnings growth. 
  • On a sequential basis, we also note that top-line sales decline has exacerbated from 0% y-o-y in 4Q14 to -8% y-o-y in 4Q15. 
  • Going forward, the success of new product launches to improve sales and earnings are also subject to the market’s response and acceptance. 
  • Our earnings growth outlook is muted, at least until earnings recovery is proven. 


Pegged to 20x PE. 

  • We raise our target price to S$0.97, based on 20x price earnings multiple on FY17F earnings. 
  • Upside is capped even after factoring in FY17F’s growth prospects. 

Key Risks to Our View: 

Surge in commodity prices. 

  • We expect SUPER to enjoy the benefits of lower coffee bean prices of c.US$1,500/mt to US$1,700/mt compared to an average of US$2,000 in 2014. This should aid margins going forward. 
  • Poor weather could impede our positive margin outlook and derail our earnings estimate for the stock.

Alfie Yeo DBS Vickers | Andy Sim DBS Vickers | 2016-03-23
DBS Vickers SGX Stock Analyst Report HOLD Downgrade BUY 0.97 Up 0.91