Jack Phang Investment

Super Group - My Analysis Report - 20 September 2012

Jack Phang Sheng Jie
Publish date: Fri, 21 Sep 2012, 05:01 PM
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Source: http://www.jackphanginvestment.com/2012/09/super-group-my-analysis-report-20.html

Super Group is a leading instant coffee brand owner in Asia with an upstream ingredients processing business. We are confident of a positive earnings outlook for Super, underpinned by sales growth in fast emerging Southeast Asian markets partly due to its efforts on branding/marketing activities.

Super Group has grown about compound  10% in revenue annually and 14% in net profit annually respectively from year 2007 to year 2011. This is due to its strategy to grow its business beyond Singapore to Asia region. It is currently number 3 instant coffee seller in Asia region, after Nestle (under Nescafe brand) and Kraft Foods (under Maxim brand). The net profit margin stays at healthy 14%, partly due to its operation efficiency and it is expanding in a faster growing region in Asia.

Why do I like Super?



  • It is one of the top brands instant coffee marker in Asean countries, lagging behind the market leader Nestle. Nonetheless, its PE is still below 20, which I think is unjustifiable given its more than 10% compound annual growth rate in recent years. 
  • It has a good FCF business model. In case you do not really what FCF means for, it means that how many cash flow the company can use for expanding or for dividend distribution after deducting the net Capital Expenditures from Operating Cash Flow. 
  • It has 50% dividend paid out ratio policy currently. For an investor who likes "CASH", I believe we can benefit from both capital growth and dividend growth. To me, the dividend can be used to repurchase the shares or reserve for other better investment opportunities or for emergency purpose. 

 
Anyway, if I have a choice, I would actually go and invest in Nestle which has the market leadership position. But because I prefer to invest in a lower PE company with good cash flow business model, so Super Group is one of the counters in my watch list. 

 

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