Super Group draws profit momentum from fast-expanding regional sales

Double-digit growth in Myanmar, Philippines and Thailand.

Super Group posted 2Q13 recurring profit of S$19.6m on the back of better sales, which is in part boosted by blistering growth by regional sales in Southeast Asia. The higher sales though were blunted by higher expenses.

Here's more from OSK-DMG:

Super 2Q13 results in line. Super Group (Super)’s 2Q13 recurring profit of SGD19.6m (+19% y-o-y, +4% q-o-q) was in line with expectations, as the better sales and GPM were offset by higher opex. Overall revenue rose 23% y-o-y to SGD138m. Branded consumer (BC) sales gained 10% y-o-y to SGD92m (our estimate: SGD93m) on double-digit growth in Myanmar, the Philippines and Thailand. Food ingredient (FI) surged by 65% to SGD46m (our estimate: SGD37m) as sales to South-East Asia tripled to SGD32m, mitigating a 17% dip in contribution from East Asia. 2Q13 GPM widened to 38.8% (our estimate: 37.3%) on lower raw material prices and higher operating efficiency. We note that 2Q13 GPM at the BC and FI divisions stood at 40-45% and 25-30% respectively.

However, operating expenses rose to 22.0% of revenue (1Q12: 19.4%), driven by higher promotion expenses arising from its recent rebranding exercise and admin costs on a higher headcount. Its reported profit stood at SGD36.5m, lifted by a SGD17.0m disposal gain. We: i) lift our FY13F-14F GPM assumptions by 1.1ppt and 2.1ppt on lower raw material prices, but ii) increase assumed operating costs to 20.8% and 20.3% of revenue for each year.

These resulted in insignificant changes of -5% and 1% to our FY13F-14F estimates respectively. Given the recent increase in interest rates, our WACC - now a higher 4.5% (from 3.7% previously) – leads to a lower TP of SGD4.58 (vs SGD4.88 previously). We believe a better debt-equity structure to facilitate a higher dividend payout or earnings accretion from potential M&As may warrant a higher valuation.