MENU

This Share Is Near Its 52-Week Low: Is It Set For A Rebound?

Since reaching its trough during the Global Financial Crisis of 2007-09, the share price of this company had rose by as much as 1,360% at its peak last August.

However, at its highest point, it carried a hefty valuation – a price/earnings ratio of 27 –  that might be too much to handle; shares of the company have been falling since August 2013 due mainly to lower than expected performance.

The company in question is none other than the instant beverage manufacturer Super Group (SGX: S10). It was once a darling in the market with a rapidly ascending share price and a lofty valuation. But, Super Group has since lost some of its lustre with its shares having declined by 43% from S$2.45 (its August 2013 peak) to S$1.395 currently.

In fact, at its current price, Super Group is just a whisker away from its 52-week low of S$1.38. Is the current situation just a temporary road block for the company? Or was the company’s earlier valuation too irrational with the market now rebalancing expectations with reality?

Rumours of mergers and acquistions

Earlier this January, there was speculation that Super Group could be an acquisition target for some of the largest food and beverage companies in Asia. A price tag of at least S$2.79 billion was even mentioned as being the minimum price at which the company’s founders would consider selling, even though the company had a market capitalisation of only around S$2.14 billion at the time. Currently, Super Group’s market capitalisation is around S$1.54 billion.

In the end, nothing came out of those buy-out rumours and since then, Super Group has seen a slowdown in both its top- and bottom-line.

Valuations

Currently, Super Group derives around 70% of its revenue from the sale of branded consumer products like instant coffee and tea. The rest of its revenue comes from the sale of food ingredients to other beverage manufacturers.

If we compare Super Group against some of its regional as well as global competitors, we can see from the table below that the company sits in the middle of that whole group in terms of its valuation.

Company

Price/Earnings ratio

Price/Book ratio

Dividend Yield

Power Root Berhad

17.0

3.0

4.1%

Oldtown Berhad

20.1

3.4

1.4%

Super Group

16.3

3.2

3.2%

Nestle

22.1

3.5

3.1%

Kerry Group*

20.0

5.0

0.7%

Food Empire#

56.7

1.0

1.4%

Average

25.4

3.2

2.3%

*Kerry Group’s PE ratio is calculated using forward earnings; #Food Empire’s high valuation is due to depressed earnings

Nestle, Power Root Berhad, Food Empire (SGX: F03) and Oldtown Berhad are some of Super Group’s competitors within the branded consumer products space. Meanwhile, Kerry Group, along with Nestle, are two big organisations that have the capability to compete with Super Group in the food ingredients business.

Elsewhere, Food Empire has also just started building up a food ingredients business that sells items like non-dairy creamer. But, it might not have the volume and research capabilities to threaten Super Group just yet.

Foolish Summary

Although Super Group has a number of growth engines in its pipeline, its current valuation might not seem very attractive when pitted against its peers. Investors looking for a turnaround in its fortunes might need to take that into consideration.

Click here now for your FREE subscription to Take Stock Singapore, The Motley Fool's free investing newsletter. Written by David Kuo, Take Stock Singapore tells you exactly what's happening in today's markets, and shows how you can GROW your wealth in the years ahead.  

The Motley Fool's purpose is to help the world invest, better. Like us on Facebook  to keep up-to-date with our latest news and articles.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim owns Food Empire.