SINGAPORE (Aug 15): UOB Kay Hian is maintaining its “hold” call on Super Group with a lower target price of 80 cents from 85 cents previously.

Last week, the food manufacturer and distributor posted a 7% fall in 2Q16 earnings to $9.8 million from $10.5 million a year ago in 2Q15, with net profit impacted mainly by lower 1H revenue as well as higher selling & distribution (S&D) expenses and general and administrative expenses.

<i><strong>(See <a href="http://www.theedgemarkets.com.sg/sg/article/super-group-posts-7-fall-2q-earnings" target="_blank">Super Group posts 7% fall in 2Q earnings</a>)</strong></i>

In a Monday report, lead analyst Thai Wei Ying says that although Super Group’s revenue, which fell 5%, was “disappointing amidst challenging conditions” – especially in Myanmar due to intensifying competition and reduced selling price due to Kyat weakness – there is still hope yet for recovery from FY17 onwards.

The main draw, says the analyst, is in Super Group’s strong 1H operating cashflow at $45 million. Net cash increased to $116.5 million (10 cents per share) as of June 30. Thai believes free cashflow could see further improvements from FY16 onwards as the group moves beyond its high capex intensity period.

In addition, products such as Essenso and Owl Kopitiam Roast Coffee were launched earlier this year in Singapore, Malaysia and Thailand. Although they have yet to make a material impact, Thai thinks the “early signs” from these products point to future gross margin improvement as well.

“As an indication, [Super Group’s] 1H16 gross profit margin improved 1.6 ppt to 37.4% on higher composition of BC sales, which carries a higher gross profit margin,” she illustrates.

As at 1.25pm, shares of Super Group are trading 0.65% higher at 78 cents.

Higher cashflow renews hope for Super Group 

Creative Technology expects 2HFY2022 revenue to be below target at US$27 mil

Straits Times Index decline resumes as it could head towards 3,000 

DBS says it remains buyers of Digital Core REIT after further downside in price

Opening up to new horizons: Digital assets as a means of settlement in cross-border transactions 

Three-quarters of Singaporeans answered scam calls recently: Toku  

Businesses in Singapore eager to hire international talent with the rise of remote work

Nio Inc delivers 12,961 vehicles in June, up 60.3% y-o-y

EMA issues second request for proposals for electricity imports

Higher cashflow renews hope for Super Group

Related Stories

Highlights

ARA US Hospitality Trust to sell four Hyatt Place hotels for US$32.5 mil

Related Stories

DBS slashes Nanofilm's TP to $3.70 with dampened demand in near-term

CEREIT assets benefitting from positive fundamentals in key office and logistics markets: PhillipCapital

DBS suspends coverage of Bukit Sembawang Estates; keeps 'buy'