A Close Look At Super Group Ltd’s Growth, Dividend, And Valuation

Instant coffee manufacturer Super Group Ltd (SGX: S10) is a company that the Motley Fool Singapore’s first-ever stock recommendation service, Stock Advisor Gold, recommended in June 2016 at a price of S$0.834.

Last week, the company announced that it has received a privatisation offer from Jacobs Douwe Egberts B.V. at a price of S$1.30 per share. The offer is subject to approvals from antitrust authorities in a number of countries including China and the Philippines. Right now, Super Group’s shares are trading around S$1.25, a tad lower than the takeover price.

I thought it would be interesting to showcase three important aspects about Super Group’s business, namely, its growth, dividend, and valuation. Such information could perhaps be helpful for investors in thinking about the gap between its current stock price and offer price, as well as any future privatisation candidates.

So, let’s have a look:

1. Growth

The table below shows how Super Group’s revenue and net profit have changed over its last five fiscal years:

Source: S&P Global Market Intelligence

We can see that Super Group had been growing both its revenue and net profit from 2011 to 2013. But then, both financial numbers started falling.

2. Dividend

Just before Super Group announced its privatisation offer, the company’s shares were trading at S$0.97 each. With a trailing dividend of S$0.022 per share per share, the company has a yield of 2.3%, which is lower than SPDR STI ETF’s (SGX:ES3) yield of 3.2%. The SPDR STI ETF is an exchange-traded fund that tracks the fundamentals of Singapore’s market barometer, the Straits Times Index  (SGX: ^STI).

We can also try and assess the sustainability of the company’s dividend by looking at two financial ratios: the debt-to-shareholders’ equity ratio and the pay-out ratio. But, do bear in mind that there are many other things to look at beyond the two ratios.

The debt-to-shareholders’ equity ratio is a gauge for the level of financial risk a company is taking on. Meanwhile, the pay-out ratio is the percentage of a company’s profit that is paid out as a dividend. Generally speaking, the lower the two ratios are, the better it could be.

In Super Group’s case, its latest debt-to-shareholders’ equity ratio is about 5.4% and its pay-out ratio is 55%.

3. Valuation

With Super Group’s pre-takeover-announcement share price and earnings per share, the company has a price-to-earnings ratio of 24.

There are two things to note about this figure. First, this PE ratio is near the middle of where it has been over the past five years, as you can see in the chart below:

Source: S&P Global Market Intelligence

Second, Super Group’s PE is higher than the SPDR STI ETF’s PE of around 12.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Super Group. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.