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8 Quick Things Investors Should Know About Super Group Ltd

Super Group Ltd (SGX: S10) is one of the cool companies in Singapore that shares webcasts and/or transcripts of their earnings presentations.

There may be useful and important information that investors can learn from the webcasts and transcripts. Last week, Super Group released the results for its fiscal first-quarter (the three months ended 31 March 2016). I had spent some time going through the webcast for that earnings presentation and managed to pick out eight things that may be important for investors to note.

But before I share them, here’s a quick background of Super Group for some context: The company is a manufacturer of instant beverages (mostly instant coffee) and ingredients that go into the making of said beverages. It has two main business segments: Branded Consumer (BC) and Food Ingredients (FI).

With that, here are my notes:

  1. Chief financial controller Koh Chun Yuan started the call with an overview of Super Group’s latest earnings. Super Group expects currency headwinds to continue in the current financial year. Koh said that weakness in the Thai baht and Malaysian ringgit had affected results in the latest quarter. On a constant currency basis, Super Group reported sales growth of 0.3%.
  2. Super Group’s gross profit margin also improved to 37% due to lower raw material costs. But, a better gross margins did not lead to operating profit growth. Super Group had spent more on advertising and promotional activities for its new products like the ESSENSO microground coffee and Owl Kopitiam Roast and Ground coffee. The instant coffee maker also hired more sales personnel and had set-up a new Food Service arm.
  3. Koh was also happy to report that Super Group’s operating cash flow had improved significantly from S$5.6 million in the first quarter of 2015 to S$15.6 million in the reporting quarter. He said that it was a reflection of Super Group’s cash generative business model. Later on, Koh said that Super Group’s operating cash flow margin was almost 22%, up from the operating cash-flow margin of under 5% recorded a year ago.
  4. Meanwhile, Koh also highlighted Super Group’s strong financial position. Cash and cash equivalents increased to S$143.3 million, up from the S$102.4 million seen a year ago. The company’s debt to equity ratio was also only 0.21.
  5. The BC segment contributed to 69% to the company’s total revenue for the first quarter of 2016 with the FI segment contributing the rest. This is unchanged from the same quarter a year ago.
  6. For the BC segment, almost 82% of its sales came from Southeast Asia. From a product standpoint, coffee was the main contributor, with 78% of BC sales. Cereals contributed 9% of BC segment sales. Super Group will be looking to launch new products in categories such as tea and cereal.
  7. For the FI segment, Southeast Asia and East Asia contributed 47% and 45% to sales, respectively. Interestingly, FI segment sales from other countries grew by 12 times due to entry into new markets such as Israel.
  8. From the FI products perspective, non-dairy creamers and soluble coffee powders made up 54% and 45% of sales, respectively. This compares with the 71% in sales that the non-dairy creamer product contributed in the first-quarter last year. Soluble coffee powders picked up the slack, posting a significant increase due to the introduction of freeze dried soluble coffee powder.

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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