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Falling Knife of the Week: Super Group

knife3-in-1 beverage maker, Super Group Limited (SGX: S10), shaved off S$501.8 million from its market capitalisation. This translates to a 20.4% decline in share price, as of yesterday’s close of $3.46, making it our “Falling Knife of the Week”.

11th November 2013 was the Remembrance Day in the United Kingdom and it will surely be a date to remember for all shareholders of Super Group. The company released its third quarter earnings on that day and the company recorded a 17% year-on-year decline in net profits. The revenue, however, had increased by 2% year-on-year. That marked the decline in the share price of Super. At one point, the shares were down 30.5% in the span of three days.

Super Group was established in 1987 and it claims to have pioneered the manufacture of 3-in-1 beverage products in Southeast Asia. Super Group owns the ubiquitous Super and Owl brand coffee product range. Currently, Super has two key business segments – Branded Consumer and Food Ingredients. The Branded Consumer segment carries the beverage products mass-produced for consumers and the Food Ingredients segment produces ingredients such as spray-dried coffee, freeze-dried coffee and non-dairy creamer for multinational F&B manufacturing and food service companies, as well as the hotel, restaurant and café sector.

Early this year, it did a re-branding exercise by unveiling a new corporate logo. Gone was the leafy logo that looked as dated as Rip Van Winkle and on board came a more vibrant red-orange logo that is longing to put a smile on the faces of consumers. Super Group also made its first foray into the F&B outlet scene with the opening of Owl Café at The Star Vista, end of 2012.

In the near future, the company is looking to open up a botanic herbal extract (BHE) plant. The total estimated investment would be around RM138 million (approximately S$56.6 million). Once up and running at full capacity, the plant can produce up to 3,000 tons of BHE. BHE will serve as an additional product in the Food Ingredients segment and this is in line with the Super’s long-term strategy of becoming an ingredient specialist in Asia. Furthermore, certain BHE can be used to enhance the flavor of coffee under its Branded Consumer segment. This may help it to widen its market share by increasing the range of coffee products offered.

Currently, Super Group is trading at 19.6 times its trailing twelve months’ earnings. The dividend yield stands at 2.1%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.  Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.