SUPER GROUP LTD
S10.SI
Super Group - Narrowing earnings decline
- 1Q16 earnings in line boosted by soluble coffee powder sales
- Earnings declining at a lower rate
- Expect earnings to grow by 7% y-o-y in FY16F
- Maintain HOLD, TP S$0.97.
1Q16 within expectations.
- Earnings were S$11.6m (- 15%, y-o-y) on the back of S$119m of revenue (-2% y-o- y). Even though revenue and earnings have continued to decline, the underperformance on a y-o-y basis has become sequentially smaller.
- We hold the view that earnings will grow in FY16F after registering a 31% y-o-y drop in FY15.
- This current set of results has validated that Super is on track for earnings recovery.
Ingredient sales shows sequential improvement.
- Revenue drop of 2% is driven by a sequentially smaller decline in Ingredients segment (-2.7% y-o-y, S$36.5m), improving from the 20% fall in 4Q15.
- Sales of freeze-dried soluble coffee powder and sales into Indonesia and Malaysia contributed positively to revenue. However, the drag came from lower sales from China, Philippines and non- dairy creamer.
Branded consumer sales positive in local currency terms.
- Branded consumer sales (S$83m) declined by 1.4% y-o-y due to weaker foreign currency translation in the form of THB and MYR. Sales in local currency terms improved 2% y-o-y.
- For coffee products in particular, there was 0.7% y-o-y improvement in sales after four consecutive quarters of y-o-y declines. New products ESSENSO MicroGround Coffee and Owl Kopitiam Roast & Ground Coffee, and promotions in Singapore, Malaysia and Philippines contributed positively. But these were offset by lower sales into China, Thailand (FX translation and lower A&P), and Myanmar (ASP reduction).
Stable EBIT margins.
- Gross margins improved, but higher opex meant that EBIT margins remained stable at 14%.
- Gross margins were 37.5% (+1.4ppt y-o-y, -1.1ppt q-o-q) on more favourable raw material prices of coffee beans and palm kernel oil. This was mitigated by higher opex which, as a percentage of sales, expanded 1.8ppt to 24.5% on higher A&P, personnel costs and depreciation charges.
Headline net profit dragged by FX, taxes.
- Although core operations have shown some signs of stability, headline net profit has declined more than revenue.
- Key items include FX losses of S$0.7m and comparatively higher effective tax rates (24.3% vs 20.5% for 1Q15) largely from the expiry of tax incentives from overseas subsidiaries.
Alfie Yeo
DBS Vickers
|
Andy Sim CFA
DBS Vickers
|
http://www.dbsvickers.com/
2016-05-12
DBS Vickers
SGX Stock
Analyst Report
0.97
Same
0.97
