Has Super Group lost its super powers?

Company Background

Super Group Ltd, an investment holding company, manufactures and distributes food and beverage products primarily in Singapore, Southeast Asia, and East Asia. The company operates in two segments, Branded Consumer and Food Ingredients.

Dividend Information

Dividend Distribution

2012: 0.038

2013: 0.071

2014: 0.080

Dividend distributed out has been increasing which is a good sign. For investors who have not entered into this counter, better news! Dividend yield is increasing! Dividend yield is about 7%! (Closed 1.145) But don’t be too happy just yet. Read on.

Price Trend

5-year trend: Uptrend. Uptrend line has begun showing cracks in recent 2 months.

1.5-year trend: Downtrend.

The current downtrend Super Group is experiencing seems to be quite strong, as shown by the 5-year trend being penetrated. Resistance at 1.16 (Downtrend resistance line) maintains.

Price levels to watch out for

1.25: Watch for strong breakout at 1.25 for potential trend reversal

1.03: Failure to be supported at 1.03 indicates continuation of downtrend with next support at 0.995

Financials

Income Statement

Income Statement

Overall, the income statement of Super Group looks alright to me, except for the EPS and Payout ratio for the latest results, ending 30 Sep 2014.

EPS x Payout Ratio

EPS has risen steadily y-o-y since 2010 but the latest set of results might have difficulty continuing the trend to hit 0.100 in EPS. Payout ratio also experienced a surge up to 76% from the normal 40%. A point to note is the 1-for-1 Bonus Issue on 26 May 2014 may have a negative impact on Super Group’s dividend yield going forward.

Negative impact you say??

Funny Picture

The impact of the bonus issue is seen in dividend given out in August fall by half.

Before bonus issue:

May ’13 – 0.051

Aug ’13 – 0.02

May ’14 – 0.07

After bonus issue:

Aug’ 14 – 0.01

Based on this, I am expecting May ’15 dividend to be something like 0.04 and Aug’ 15 to be 0.01. This would result in dividend of 2015 for Super Group to be 0.05. This means that based on current price of 1.145 (Assume no price change for comparison), would be 4.36%. Remember, previously we calculated the yield based on 1.145 to be almost 7%? Look at it now.

What now?

In my opinion, it is too late to enter Super Group if one has not entered prior to the bonus issue. The decrease in dividend yield wouldn’t affect investors who got in early because I’m still assuming some growth in dividend (0.04 instead of 0.035* for May ’15). In fact, those who entered before the bonus issue are the only ones who benefit from the growing dividend.

I don’t see dividend yield going back up to 7% anytime soon unless there is some sort of catalyst. For those who are satisfied with 4+% dividend yield that Super Group is offering you now, I wouldn’t shout “BUY!” but it is definitely a good company still. Fundamentally nothing much has changed, only that you’re at a disadvantaged simply because there are people getting 7% dividend yield while you are at 4.36%. The plus side is that dividend distribution could continue to rise which is a sign of a solid company.

Personally, I’m only interested in companies with >7% dividend yield for now as I try to achieve my 2015 goal. That’s why you notice, halfway through this post, there’s no more talks about Balance Sheet, Financial Ratios, etc. With limited capital, I’m trying to stretch my dollar as much as I can while taking calculated risk to avoid taking on unnecessary risks.

*Based on 0.07 in May’14, bringing it down to the same level for comparison with the future numbers.

MoneyDigest.sg

I’m very excited and privileged to be able to share with you that I was recently contacted to work with and write on MoneyDigest.sg! MoneyDigest is a great website especially for Singaporeans! The articles in MoneyDigest revolves around the Singaporean lifestyle which I felt would give a more personal touch to Singaporean readers. In there, you would find topics such as:

  1. Personal Finance
  2. Lifestyle
  3. Deals

I am going to roll out a series of articles, revolving around the topics of Saving, Investment, etc. There wouldn’t be so much on company research as per my personal blog here. It’s more for leisure reading and I’m writing to teach and educate. I’m thinking of creating a lesson plan that includes topics such as ‘How to perform fundamental analysis’, or into the more technical aspects of Technical Analysis where we touch on topics such as chart patterns, technical indicators, etc.

My first post on the website is already up which you can find here: http://www.moneydigest.sg/4-great-things-learn-indirectly-investing/

For facilitation, I have added a new section on my blog, ‘Articles on MoneyDigest’, if you have not already seen it on the left hand side of this blog. I would be compiling my list of articles there. Please give me your support as this is a very new experience for me and I would love to see this opportunity work out well!

And by the way, Merry Christmas and have a prosperous 2015 ahead! 

santa merry christmas 2 car

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10 thoughts on “Has Super Group lost its super powers?

  1. Hello, dividend will definitely halve since bonus issue was one for one. This will definitely affect dividend yield like what you have mentioned. However, in absolute terms, the proportion of the company shares we are holding is still the same so we will be getting the same amount of dividends?

    Like

    1. Actually yes, in this post I failed to account for the drop in share price because of the chart’s default option.

      Dividend yield hasn’t changed because although dividend was halved, so was the share price which i failed to account for.

      Like

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