Super Group

(14-05-2014, 09:46 PM)yawnyawn Wrote:

(14-05-2014, 09:22 AM)LLI Wrote: Why are they going into cafe? Isn't the ingredient business a much better business?

(13-05-2014, 07:53 PM)CY09 Wrote: Old town and Owl café are not café similar to starbucks.

The former two are more like eateries, while starbucks main stay are coffee and cakes.

In my opinion, supergroup has to secure good venue for their owl café. OCK Curry Times has been successful at this where their outlets are placed at areas where there are high lunch crowd traffic during the weekdays. Super is going to have a tough time competing in this new segment, in my view. The opening of republic plaza is a good move but how it will affect Super's profitability is anybody's guess. Will see their future Q results to gauge.

Not too optimistic of Super's Growth prospect in the near term for now. Its current valuation of 22x PE is factoring in very optimistic growth prospects for a FMCG company. Personally, think Market has overvalued it.

I presume going into the cafe business segment will increase the brand value of Super, particularly for its OWL brand, since it exposes the brand to more people. It also provides the company a new channel to sell more roasted coffee beans to the cafe outlets, which is what Old Town is doing to their 222 outlets now.

10 years(2004-2013) CAGR for Super's revenue and net profits are 12.47% and 19.06%. At today's price of 2.95(14 May 2014), it is trading at ~17x earnings as compared to Power Root(Ah Huat White Coffee) 16x earnings and Old Town 19x earnings. Looks to be a good growth stock to buy into if company can continue growing both top and bottom line at growth rates similar to the past 10 years.

F&B stocks are supposed to be defensive. However, after several quarters of negative surprises, should one start to question if Super deserves a premium rating due to "defensive" nature?

Odd Lots
Vested

Realistically speaking profit growth cant continue at the 19% mark. Law of large number applies. If supergroup can maintain 5 years of 7% CAGR from FY2013 profit, it will be amazing.

Super profits approx 88M Sing Dollar (stripping away one off gain)
Power Root approx 38M Ringgit
Old Town approx. 57M Rinngit

Data from shareinv.com

I have not been to their cafe before but my impression of Super is "instant coffee" so I wouldn't patronize their cafe if I have to pay a premium for it. There are so many cafes around. Does they really need to squeeze their head into this market?

Not vested and know very little about their business beside their "instant products".

(14-05-2014, 09:55 PM)CY09 Wrote: Realistically speaking profit growth cant continue at the 19% mark. Law of large number applies. If supergroup can maintain 5 years of 7% CAGR from FY2013 profit, it will be amazing.

Super profits approx 88M Sing Dollar (stripping away one off gain)
Power Root approx 38M Ringgit
Old Town approx. 57M Rinngit

Data from shareinv.com

Compare the profit margins of the consumer brand biz of the 3 companies and you will know which is the one that has the cost advantage and branding power. Obviously, it's not Super.

(14-05-2014, 11:53 PM)Tiggerbee Wrote:

(14-05-2014, 09:55 PM)CY09 Wrote: Realistically speaking profit growth cant continue at the 19% mark. Law of large number applies. If supergroup can maintain 5 years of 7% CAGR from FY2013 profit, it will be amazing.

Super profits approx 88M Sing Dollar (stripping away one off gain)
Power Root approx 38M Ringgit
Old Town approx. 57M Rinngit

Data from shareinv.com

Compare the profit margins of the consumer brand biz of the 3 companies and you will know which is the one that has the cost advantage and branding power. Obviously, it's not Super.

Comparing 2013 and 2012 operating margins of the branded consumer segments of the 3 companies

Old Town [33,985,460/169,685,580] 20% , [18,891,737/108,269,027] 17.4%

Power Root [41,844,162/279,354,884] 15% , [19,217,545/217,036,013] 8.9%

Super - doesn't report breakdown of its various segments of the business. However a look at AR2010 shows us that Super derived 1% and 9% of its revenue from Food Ingredient(primarily non-dairy creamers) in 2007 and 2008. So using operating margins in 2007 of 12.2% to get a sense of its margins before the growth in NDC kicked in sounds reasonable.

Looks like Old Town has the best margins for branded consumer segment but if Food Ingredient segment is taken into account, Super's operating margin will be slightly ahead at 20.7%.

Given a choice, i probably like to take a closer look at Super and Power Root. I do not like Old Town primarily due to its short listing history.

Am I seeing things or did Super just lose 50% of its value?

Did I miss anything?

Edit: My bad, I just checked, bonus issue.

Hi did further research into Super group because an individual asked me if Super was a buy due to the recent price fall.

For Supergrp, I expect this yr EPS to be 6.5 cents. I will ascribe a P/E of 16x. This coming full yr results will be significantly lower than last yr due to lack of 3M+ recognition of deferred gain amortized, political unrest and one off disposal of subsidiary in 2013. However, subsequent Fy earnings will improve due to organic growth (hopefully).

Based on free cash flow, the company earn 38M free cashflow last FY, giving it a current P/FCF yield of 2.46%, not exactly eye-catching i prefer 7.5% FCF yield at least. However do note, prior to FY 11, Super did not have much investment into PPE. it was the recent 3 FYs where Super invested around 45M+ each FY to build up its food ingredient business which has a stronger moat than its branded sale segment (albeit lesser margin). if we assume 7M PPE investment like in Fy09, its FCF will be 80M. However using 7M as a future gauge is unrealistic because the food ingredient segment requires yearly CAPEX renewal and Super recently increased investment in it to increase production capacity.

its major segment, the branded sales, is in an ultra competitive market, and as many past posts have mentioned, Super has been spending a lot more in A&P to maintain its share. So for potential and current investors, be prepared to see lower margins in this segment.

All in all, I will say Super is still not worth a buy at 1.385. ( My investment philosophy is to buy a stock which trades at 70% to my calculated IV).
What are other buddies view? Is Super a buy after the recent price drop?

Super has been struggling to grow it's branded consumer biz over the last few years, managing only single digit growth on an annual basis. But it's raw materials biz made up for it and so the stock jumped in the past few years. Now that that growth engine had sputtered, it's falling back to reality. I've always been shorting it since it missed its first earnings.

As for Oldtown, I had been vested in it since it went ex bonus
and was rewarded with a 20% gain since then (excluding the 5 sen dividend received). Artisan and Mathews had been buying the stock in the past few weeks. And Franklin Resources recently emerged as substantial share holder.

Not too long ago when Super was trading past $5, there were rumours of M&A & some brokerages were still guessing what price would likely make the founders let go.

So after the bonus issue, what now?

And that is why these days I take brokerage reports with a pinch of salt, .... no make it 10 large pinches of salt.

The recent Weekend entertainment I read was the recommendation of Ezra which has a very leveraged Balance sheet. (I am not recommending a sell on Ezra).

For us value investors, always do your own homework. relying on analyst calls wont get you far, based on my personal experience. I remember reading previously on the danger of analyst calls as many of them just follow the majority of their peers call. Cant rmb if I read it here or some online website.