Super Group plans to become an F&B giant in under a decade

Its Food Ingedient segment is the linchpin.

Here's more from DBS:

What’s new? We hosted a non-deal roadshow with Super Group for our investors in Singapore on 12 November, just after its 3Q12 earnings report. Key takeaway – building a sustainable business platform. We came away with higher confidence that management is putting in place a stronger business model that will deliver sustainable growth over the long term. Through discussions, management indicated that that it is putting in place various initiatives to increase shareholder value through : 1) expanding the branded consumer business regionally and food ingredient business globally, 2) building strong brand value and closing the premium gap on its key competitor, and 3) not compromising on profitability.

Transforming into a leading food & beverage player in Asia. Management reiterated its aim to grow Super Group into a leading food & beverage player in Asia in the next 5-10 years, with the vision to grow the Branded Consumer segment regionally and Food Ingredient business globally. Super is looking to further penetrate Asean markets by developing more product SKUs using a multi-brand strategy. Management has plans to evolve into a global Food Ingredient specialist as well, by leveraging on its competitive advantages and strong entry barriers as one of three instant coffee producers with integrated food ingredient manufacturing capabilities.

Increasing brand value and closing the competitive gap. Super Group is currently undergoing a rebranding exercise for its Super brand in Singapore and Malaysia to become more international and close the premium gap on its competitor. We believe this will increase brand value and brand equity for the company in the long run.

Not compromising on profitability. Management highlighted that it will not compromise on profitability for new products as margins will have to match or better similar products in its portfolio. There will unlikely be selling price adjustments going forward based on current input costs as coffee/palm oil prices YTD are 8%/9% lower than 2011. We retain our view that margins will expand in FY13F due to 1) lower input costs locked in for next year and 2) rebranding exercise and recalibration of product margins. 

No change to numbers since 3Q12 results report. As there is no fundamental change to our view, we leave our earnings estimates of S$97m/S$111m for FY13F/FY14F unchanged.