800 Super Holdings Ltd - Phillip Securities 2016-05-13: No trash-talk here ~ Undeservedly CHEAP

800 Super Holdings Ltd - Phillip Securities 2016-05-13: No trash-talk here ~ Undeservedly CHEAP 800 SUPER HOLDINGS LIMITED 5TG.SI 

800 Super Holdings Ltd - No trash-talk here ~ Undeservedly CHEAP

  • Inaugural quarterly results, after crossing the S$75mn market capitalisation mark. 
  • 9MFY16 revenue of S$116.6mn met 73.1% of our full year estimate of S$159.6mn. 
  • 9MFY16 NPAT of S$12.45mn met 90.9% of our full year estimate of S$13.7mn.
  • 3QFY16 EPS of 4.20 cents dwarfs 1HFY16 2.76 cents EPS.
  • Undeservedly cheap now at 4.3x of our revised FY16e EPS.

 Change from half-yearly reporting to quarterly reporting due to market capitalisation 

  • We previously forecasted on a half-yearly basis, so our next estimate was for 2HFY16. Hence, we do not have an estimate for 3QFY16. As such, we could only compare the 9M results against our full year FY16 estimates. The increased frequency in reporting should close the gap on information and price efficiencies.

 Yoy EBIT-margin expansion in 3QFY16

  • EBIT-margin in 3QFY16 expanded 6.3pps yoy to 22.6% (vs. 6.3% in 3QFY15). This was mainly due to higher yoy revenue in conjunction with 0.8% yoy lower Employee benefits expense. 
  • Employee benefits expense (i.e. Staff costs) makes up about slightly over half of total OpEx and is consequently the largest OpEx component.

 Significant rationalisation of Staff costs between 1HFY16 and 3QFY16

  • EBIT-margin in 1HFY16 was 8.4%, compared to 22.6% in 3QFY16. 
  • Employee benefits expense (i.e. Staff costs) was S$39.8mn in 1HFY16 and 56.4% of total OpEx, compared to S$16.4mn in 3QFY16 and 51.6% of total OpEx. Employee benefits expense in 3QFY16 is only c.41% that of 1HFY16. 
  • We understand from Management that lower Staff costs was due to productivity improvements and rationalisation of manpower.

 Long-term investment projects on track

  • The construction of the truck depot at Tuas South has been completed and Temporary Occupancy Permit (TOP) obtained. 
  • Construction contract for the waste to energy (WTE) plant (S$31mn) and material recovery facility (MRF) (S$19mn) have both been awarded and are expected to be completed in 1HFY18.

 Adjustments made to our forecasts

  • With greater clarity on the cost involved for the WTE plant and MRF, we have increased our FY17e CapEx assumption from c.S$20mn to c.S$35mn. 
  • We have adjusted our dividend payout ratio assumption downwards to 20% (from 29%) in FY16e and FY17e, in view of the cash requirements for the WTE plant and MRF. 
  • Adjusted Employee benefits expense accordingly in line with 3QFY16 margins observed. 
  • 9MFY16 NPAT now meets c.64% of our new full year FY16e estimate of S$19.54mn, as we are expecting 4QFY16 NPAT of S$7.09mn.

Undeservedly cheap at 4.3x (FY16e) and 4.6x (FY17e) forward P/E multiples

  • Re-iterate "Buy" with new higher target price of S$0.82 (previous: S$0.58). We are estimating FY16e to experience c.60% yoy NPAT growth. 
  • Even with the reduction in dividend payout to 20% in FY16e and FY17e, the stock still offers a dividend yield of 4.3%~4.6%.

Richard Leow CFTe Phillip Securities | http://www.poems.com.sg/ 2016-05-13
Phillip Securities SGX Stock Analyst Report BUY Maintain BUY 0.82 Up 0.58