Super Group disposes China property for S$26m

And invests in US$20m plant.

According to DBS, Super announced that it is disposing its entire 35.3% stake in non-core associate, Sun Resources, for S$26m. Sun Resources develops property in China which is a non-core investment for Super. Super will recognize a gain of S$16m from the disposal. 

DBS noted that Super will receive the S$26m cash in two installments of S$13m, on 6 May 2013 and 5 May 2014.

Here's more:

The S$16m gain will increase our net earnings (core+noncore) and dividend estimate by 14% for FY13F. This will increase dividend yield from 2.2% to 2.5% assuming a minimum dividend payout of 50% for FY13F.

In a separate announcement, Super announced that it will be investing US$20m for capex and working capital in its Botanical Herbal Extract Plant in Johor Bahru.

Super is expanding its ingredients business by establishing a 3,000 mt a year Botanical Herbal Extract manufacturing capacity capable of extracting plant and fruit based flavours for injection into tea and coffee. The line is expected to commence production in 2H13. As capacity is small, revenue impact is not expected to be significant. 

We currently have a TP of S$4.68 and look to update our earnings post 1Q13 results release. Our PE based valuation on Super remains unchanged as this development has no impact on core earnings. Maintain BUY and S$4.68 TP.