Super Group - Maybank Kim Eng 2016-08-14: Not So Super Results

Super Group (SUPER SP) - Maybank Kim Eng 2016-08-14:  Not So Super Results SUPER GROUP LTD. S10.SI

Super Group (SUPER SP) - Not So Super Results


A miss but value emerging; maintain HOLD 

  • Despite the miss, we have become inured to Super’s poor performance.
  • On the bright side, it is still profitable with ample FCF. With P/E below mean and P/B approaching -1SD, there is value emerging in the stock given its strong net-cash position of SGD0.11/share and forecasted FCF of SGD0.04-0.06/share in FY16/17. 
  • Catalyst could be M&A; either it utilises its cash to acquire growth/capability or someone sees cash-rich Super as an attractive target. 
  • HOLD, TP reduced to SGD0.86 based on 18x FY17.


2Q16 missed again; topline weak 

  • Super’s topline (-8% YoY) disappointed again in 2Q16, even below 1Q16’s already-low number. Branded Consumer (BC) fell 8% YoY as Super supported its long-time Myanmar distribution partner with lower prices following the Kyat’s drop. 
  • Myanmar was the biggest underperforming 2Q market, down an estimated 22% YoY. 
  • Food Ingredients did poorly as well (-12%) on weak consumer demand in Indonesia and the Philippines
  • 1H16 revenue/NP accounted for 44%/41% of full year forecast.


Likes: margins improved + some core growth 

  • First, we liked the fact that margins improved YoY on a higher mix of higher-margin BC revenue. BC margins topped the range at near 45%.
  • Second, BC revenue ex-Myanmar was flat in SGD terms due to depreciation of MYR, THB and RMB, but grew high single-digits in Thailand and Malaysia, low teens in China and high teens in Singapore.
  • Singapore and Malaysia growth is due to new products such as Essenso.


No growth; but value rising 

  • We reduce FY16/17/18 forecasts further by 14%/12%/13%. However, we think value is emerging in Super. 
  • At 17x FY17 P/E, the stock is currently trading below its long-term historical mean and is approaching 2011 levels. 
  • It has net cash of SGD116m (SGD0.11/share) and generates >SGD60m in operational cashflow with c.SGD20m in capex a year. 
  • While we see no catalysts yet, cash-rich Super is attractive as an acquisition target, or it could use its cash to acquire growth or capability.


Swing Factors


Upside

  • Regional currencies less volatile and/or stable over next 12 months.
  • Better-than-expected market reception of higher-margin new coffee products.
  • Better consumer sentiment in major operating markets.
  • China outperforms. A high-potential Branded Consumer market currently contributing 10% to revenue.

Downside

  • Sustained increases in commodity prices such as CPO and coffee, its key raw materials.
  • Much stiffer competition in major operating markets such as Thailand and Myanmar.




Gregory Yap Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2016-08-14
Maybank Kim Eng SGX Stock Analyst Report HOLD Maintain HOLD 0.86 Down 0.990


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