… Less than Super 3Q14 results

10 November 2014
Result Note
Less than Super 3Q14 results…
Supermax (SUCB)'s 9M14 core net profit of RM80m (-22% yoy) came
in below expectations, at 62% and 64% of our and consensus
forecasts respectively. This was mainly attributed to weaker revenue
(-20% yoy) on the back of lower production output and lower ASPs.
Thus, we are downgrading SUCB to a REDUCE with a lower TP of
RM2.17.
9M14 core net profit contracted 11.2% yoy..
Supermax reported subdued 9M14 results as revenue declined to RM
748.8m (-20%yoy). This was underpinned by: i) lower production output
attribute to ongoing automation activities and ii) lower average selling
prices (ASPs) on the back of lower raw material prices. 9M14 EBIT margin
however improved 1.1ppts to 13.1%. Nevertheless, SUCB’s core net profit
contracted 22%yoy to RM80m due to the lower revenue. A single-tier
dividend of 2 sen/share was also declared, bringing into a FY14 dividend
payout to 5 sen.
3Q14 core earnings improved 1.6%..
Despite recording a higher 3Q14 revenue of RM278.4m (+17% qoq),
SUCB’s core net profit ticked up by only 1.6% to RM27.2m. This was
primarily due to weaker EBIT margins which slipped 2.4ppts qoq to 11.5%
in tandem with higher operating expenses (+20% qoq). This was on the
back of higher cost incurred from stocking up its new factories and the
resumption of operations for its Alor Gajah plant.
Slashing FY14/15/16 estimates by 15%/14%/10%
In view of SUCB’s weaker-than-expected results, we are slashing our
FY14/15/16 estimates by 15%/14%/10% as we i) lower our utilisation rates
to 73% (from 75%) to factor in its on-going automation works and ii) slightly
tweak our cost assumptions in view of rising inflationary pressures.
Downgrade to REDUCE with lowered TP of RM2.17
We are downgrading the stock to a REDUCE call (from ADD) with a lower
TP of RM2.17 (from RM2.52). This is based on a P/E multiple of 12x (in
line with its 5-year mean P/E and CY15 EPS).
The risks to our view would be: i) sudden decline in raw material prices, ii)
continuous strengthening of USD against RM and iii) weaker-thanexpected pricing competition.
Earnings & Valuation Summary
FYE 31 Dec
2012
Revenue (RMm)
997.4
EBITDA (RMm)
147.0
Pretax profit (RMm)
137.3
Net profit (RMm)
121.7
EPS (sen)
17.9
PER (x)
13.0
Core net profit (RMm)
121.7
Core EPS (sen)
17.9
Core EPS growth (%)
9.1
Core PER (x)
13.0
Net DPS (sen)
5.0
Dividend Yield (%)
2.1
EV/EBITDA (x)
10.6
2013
1,127.3
148.8
155.1
128.8
18.9
12.3
128.8
18.9
5.8
12.3
5.0
2.1
10.7
Chg in EPS (%)
Affin/Consensus (x)
2014E
1,005.4
123.5
137.2
110.4
16.2
14.4
110.4
16.2
-14.2
14.4
5.0
2.1
12.4
2015E
1,102.8
135.5
152.5
123.4
18.1
12.9
123.4
18.1
11.5
12.9
6.0
2.6
11.2
2016E
1,208.6
160.9
178.3
142.5
20.8
11.2
142.5
20.8
15.1
11.2
7.0
3.0
9.2
-15%
0.9
-14%
0.8
-10%
0.9
SUPERMAX
SUCB MK
Sector: Gloves
RM2.33 @ 7 Nov 2014
REDUCE (downgrade)
Downside: 7%
Price Target: RM2.17
Previous Target: RM2.52
Price Performance
Absolute
Rel to KLCI
1M
1.7%
2.3%
3M
1.7%
4.2%
12M
-8.3%
-9.2%
Stock Data
Issued shares (m)
1,107.0
Mkt cap (RMm)/(US$m)
1577.8/471.5
Avg daily vol - 6mth (m)
1.9
52-wk range (RM)
2.06-3.08
Est free float
50.5%
BV per share (RM)
1.4
P/BV (x)
1.7
Net cash/ (debt) (RMm) (3Q14)
(19.1)
ROE (2014E)
10.7%
Derivatives
NIL
Shariah Compliant
Yes
Key Shareholders
Kim Sim Thai
Bee Geok Tan
EPF
20.5%
15.2%
5.0%
Source: Affin Hwang, Bloomberg
Research Team
(603) 2145 8158
research@affinhwang.com
(for further enquiries, please contact Walter
Aw; (603) 2145 0403,
walter.aw@affinhwang.com)
Source: Company, Affin Hwang estimates
Affin Hwang Investment Bank Bhd (14389-U)
(Formerly known as HwangDBS Investment Bank Bhd)
Page 1 of 3
10 November 2014
Fig 1: Results Comparison
FYE 31 Dec (RMm)
3QFY14
QoQ
YoY
9MFY14
YoY
Revenue
278.4
% chg
16.9
% chg
(2.2)
748.8
% chg
(19.9)
Op costs
(246.2)
19.9
0.2
(650.9)
(20.9)
EBIT
EBIT Margin (%)
Int expense
Associates
EI
Pretax profit
Tax
Tax rate (%)
MI
Net profit
EPS (sen)
Core net profit
32.1
(3.1)
(17.4)
98.0
(12.5)
11.51
-2.4ppts
-2.1ppts
13.1
1.1ppts
(2.1)
2.4
0.0
32.4
(4.8)
(12.1)
1.0
(6.8)
5.7
26.6
(38.5)
5.8
(49.7)
0.0
0.0
0.0
0.0
0.4
(20.1)
96.8
(17.3)
(10.4)
17.3
(16.0)
(16.6)
14.8%
(0.3)
27.3
4.0
27.3
0
0
16.5
0
93.7
(52.4)
(0.8)
(20.6)
2.0
(23.8)
80.1
(21.9)
2.0
(23.8)
11.8
(21.9)
2.0
(23.8)
80.1
(21.9)
Comment
Lower revenue generated qoq due to
lower ASPs and lower output production
due to on-going automation processes
Driven by lower raw material prices
especially latex prices
EBIT margins expanded due to lower
operating costs and better efficiencies
Lower profit from associate companies
Higher effective tax rate on the back of
expiring reinvestment tax allowances
Below our and consensus expectations
Source: Affin Hwang, Company data
Affin Hwang Investment Bank Bhd (14389-U)
(Formerly known as HwangDBS Investment Bank Bhd)
Page 2 of 3
10 November 2014
.
Equity Rating Structure and Definitions
BUY
Total return is expected to exceed +15% over a 12-month period
TRADING BUY (TR Total return is expected to exceed +15% over a 3-month period due to short-term positive development, but fundamentals are not strong enough to warrant a
BUY)
Buy call. This is to cater to investors who are willing to take on higher risks
ADD
Total return is expected to be between 0% to +15% over a 12-month period
REDUCE
Total return is expected to be between 0% to -15% over a 12-month period
TRADING SELL
(TR SELL)
Total return is expected to exceed -15% over a 3-month period due to short-term negative development, but fundamentals are strong enough to avoid a Sell
call. This is to cater to investors who are willing to take on higher risks
SELL
Total return is expected to be below -15% over a 12-month period
NOT RATED
Affin Investment Bank does not provide research coverage or rating for this company. Report is intended as information only and not as a recommendation
OVERWEIGHT
Industry, as defined by the analyst’s coverage universe, is expected to outperform the KLCI benchmark over the next 12 months
NEUTRAL
Industry, as defined by the analyst’s coverage universe, is expected to perform inline with the KLCI benchmark over the next 12 months
UNDERWEIGHT
Industry, as defined by the analyst’s coverage universe is expected to under-perform the KLCI benchmark over the next 12 months
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(Formerly known as HwangDBS Investment Bank Bhd)
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