Super Group

Super Group: Macquarie initiates coverage with $4.60 TP. House note that rising wages in Asean supports instant coffee consumption growth in Super’s key markets and rising demand for premium, functional instant coffee. assumes market share gains in Myanmar (second largest market) and potential price hikes following its recent rebranding campaign, adding 11% to upside. 13-20% above consensus with 13-14E EPS estimates largely on the back of lower raw material price assumptions, which should normalise in 2015. High quality, cash generative business, 5-yr average ROIC and free cash flow conversion of 22% and 65%, pays at least 50% of its profits as dividends, unlevered balance sheet also offers scope for special dividends. Undemanding valuations, trading at 21x 2013 PE, burning off to 18x in 2014, PEG ratio of 1x (2012 as base year) is at a 30% discount to average Asean consumer staples.