3 Wise Views on Super Group Ltd

Three wise men were blindfolded and led one at a time into a room where an elephant stood. Each was asked to discern what was in the room without removing his blindfold.

The first, upon touching the elephant’s trunk, concluded a “snake” was in the room. The second, upon contacting a leg, concluded a “tree” was in the room. The third, upon grasping the tail, concluded a “rope” was in the room. All were surprised to discover the elephant once their blindfolds were removed.

— old Indian fable

You may have heard this old fable before. The three blindfolded wise men were not able to make a good guess of the complete picture (in this case, an elephant).

It can be the same with investing. For any potential investment, our own view may be limited, and we may miss some major points. We could always do with more intelligent and Foolish perspectives.

To demonstrate, let’s use food and beverage (F&B) purveyor Super Group Ltd  (SGX: S10) as an example. Its business can be segmented into branded consumer sales (mainly of instant coffee) and food ingredient sales.

You can read more about the company here.

With this company, I would like to share three possible views, from three differing investor personalities no less. They are the value investor, the income investor, and the growth investor.

The value investor’s view

The value investor may be puzzled if anyone he (she) knows happens to have an interest in Super Group.

What the value investor may see is an F&B outfit that is trading at a high trailing price to earnings ratio of 24 at the moment. This is also much higher than the trailing PE of 14 for the SPDR STI ETF (SGX: ES3), a proxy for Singapore’s market barometer the, Straits Times Index (SGX: ^STI).

Super Group’s strong balance sheet (the company has a net-cash position) and ability to generate free cash flow are positive signs, but the value investor may not get past the company’s high valuation and would probably just toss the share into the “too hard” pile.

The income investor’s view

With Super Group’s current share price of S$1.485 and dividend of 3.1 cents for 2014, the company offers a dividend yield of 2.1%.

That may not be a very attractive yield, but the income investor may have noted that Super Group has had a history of growing its dividend (see reference chart below). Furthermore, the dividend has been mostly backed by positive free cash flow.

Super Group Financials

Source: S&P Capital IQ

There was a blip in the dividend payout in 2014, but the initial impression that Super Group gives should interest the income investor to dig in further. The company’s policy of paying out at least 50% of its net income as dividends would probably also help grease the cause.

The growth investor’s view

In contrast to the value investor, the growth investor might be intrigued with Super Group.

The healthy growth in top-line that Super Group’s branded consumer and food ingredients segments have enjoyed in the past six years may pique the interest of the growth investor.


Source: Super Group’s Earnings Report

Furthermore, the company is looking beyond coffee and beyond Asia for its next stage of growth. The increasing profits, coupled with the sweetener of a dividend, may encourage the growth investor to look deeper into this company.

Foolish summary

So, there you have it. Three quick perspectives from three different investor personalities looking at the same company. Thinking as different investor personalities and coming up with different views can be a useful exercise for us.

Collectively, the differing views may be worth much more than the sum of their parts.

So, do you – Foolish reader – have another company of interest in mind? Why not give the differing views approach a try yourself and then share it with us? We all may become better investors from sharing our motley views.

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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 Chin Hui Leong owns shares in Super Group.