■ Starting to roll out new products. Their higher ASPs should benefit growth & margins from FY16.
■ Short-term, cut FY15 EPS by 21% for weak MYR & kyat & later-than-expected rollout.
■ BUY with SGD1.42 TP, 1SD above 5-year P/E mean. Catalysts from signs of FY16 recovery, M&As & possibly more dividends.
Super has started to roll out its new Branded Consumer (BC) products in Singapore, Malaysia and China, followed by the rest of its markets by 1H16. ESSENSO micro-ground coffee, priced at a premium, has just been launched in Singapore and Malaysia. Its new products, mostly coffee, are priced 1.5-2x higher than its basic 3-in-1 offerings. They can be expected to lift prices and margins over time. We believe outperformance will come from retailers eager to work with Super to stimulate sales in a weak retail environment.
Elsewhere, we believe Food Ingredients (FI) could be boosted by China’s incoming food policy emphasising supplier certification and the traceability of ingredients. As Super’s plants in China are fully certified to meet the new regulations, we expect them to benefit.
Longer term, we believe Super’s excellent financials will allow it to acquire its way into new growth areas and reward shareholders. We expect FCF to improve markedly from FY15, now that its heavy-capex phase is over.
Shorter term, steep currency weakness in Malaysia and Myanmar may affect profits in FY15. We cut EPS by 21%, to adjust for the extreme currency weakness in 3Q.
What’s Our View
Maintain BUY with TP at SGD1.42, 1SD above its 5-year P/E mean. We expect catalysts to come from a potential recovery in FY16 with its new products, M&As and improving dividends. (Read Report)
Source : Maybank Kim Eng Research