Super Group

Super Group’s 2Q15 results missed expectations as net profit tumbled 30.2% y/y to $10.5m, while revenue slipped 4.7% to $125.5m in its traditionally weakest quarter.

The branded consumer segment recorded revenue of $80m (-4.3%) marred by underperformance in the Philippines, East Asia as well as Eastern Europe. Thailand, Myanmar, and China were bright spots with better revenue contributions.

Coffee continued to be a major revenue generator (78.5%) even though sales eased to $62.8m (-2.3%). Tea, instant noodles, snacks, and other products, suffered a more substantial sales decline to $11m (-16%), while cereals held steady at $6.2m.

Its food ingredients segment slipped to $45.5m (-5.2%) on weaker sales from the Philippines, and China. Indonesia was the sole standout.

Non-dairy creamer evenue slid to $22.3m (-18.3%) paring growth in soluble coffee powder to $22.8m (+11.2%).

Gross margins remained relatively stable at 35.5% (-0.1ppt) on cheaper raw materials which helped to offset the decline in sales.

Bottom line was pressured by higher tax expenses of $4.3m (+107.9%) on the expiry of overseas tax incentives as well as FX loss of $1.1m (+200.8%).

Despite the poorer headline performance, Super’s free cash flow turned positive ($4m) following the completion of expansion projects last year. Balance sheet remained sturdy with net cash of $70.1m.

The group maintained its interim DPS of 1¢, implying a dividend yield of 4.7%.

Maybank-KE expects Super to catch up in the seasonally stronger 2H15 as new premium-priced products will be launched to help rejuvenate growth.

The house notes that its return to positive cash flows and its large cash hoard could help drive acquisition deals as well as a potential increase in dividends.

Recent broker ratings:
Maybank-KE maintains Buy but cuts TP to $1.42 from $1.57
UOB-KH maintains Hold, cuts TP of $1 from $1.25
CIMB maintains Reduce, cuts TP of $0.85 from $1.10