20181115-辉立证券-800_Super_Holdings_Ltd_8页_719kb

800 Super Holdings Ltd 1Q19 Results Summary

Core Content

This summary outlines the financial performance and outlook of 800 Super Holdings Ltd for the first quarter of 2019 (1Q19), as well as the key factors influencing its results and future prospects. The report is prepared by Phillip Securities Group, with a focus on the company's operations in Singapore, particularly in the industrial sector.

Key Financial Performance (1Q19)

• Revenue: $43.0 million (SGD), up 7.6% YoY, driven by contributions from the Pasir Ris-Bedok contract, Iwash Laundry, biomass plant, and sludge treatment plant.
• EBITDA: $5.67 million (SGD), down 25.1% YoY, due to higher variable costs outpacing revenue growth, resulting in a margin decline from 18.9% to 13.2%.
• EBIT: $2.55 million (SGD), down 51.8% YoY, as operational expenses increased by 16% YoY, leading to a margin drop from 13.2% to 5.9%.
• PATMI: $1.74 million (SGD), down 60.4% YoY, reflecting lower profitability due to margin compression and project ramp-up.

Main Points and Analysis

Positives

• Sequential Improvement in EBITDA: EBITDA rose by $3.70 million to $5.67 million, indicating improved utilization of fixed assets. However, the increase was slower than expected due to the ramp-up phase of new projects.
• Controlled Employee Benefits Costs: Labour costs, the largest component of operating expenses, were 1.6% lower YoY despite higher revenue, attributed to improved labour productivity.
• New Contract Contributions: The Pasir Ris-Bedok Public PwC contract began contributing revenue, with an estimated $3 million in 1Q19 and an additional $2 million expected in 2Q19.

Negatives

• Higher-than-Expected Costs: Purchase of supplies and disposal charges increased by $4.3 million or 75% YoY, outpacing revenue growth and negatively impacting margins.
• Margin Compression: Projects are still in the early stages of operations, leading to lower margins. The sludge treatment plant is only 50% utilized, and the biomass plant is not operating at full capacity.
• Weaker Balance Sheet: The debt-to-equity ratio rose to 1.24x YTD, but is expected to improve sequentially to 1.17x by 4Q19. The current ratio improved to 0.98x, but the company remains in a net current liability position.

Financial Projections and Valuation

• Earnings Estimates: FY19e and FY20e earnings are slashed by 45% and 43%, respectively, due to higher costs and margin compression.
• Target Price: Downgraded to SGD 0.80 (from SGD 1.03), with an implied FY19e forward P/E of 18.2x.
• Valuation Ratios:
  • P/E (adj.): 17.8x (FY19e), 16.9x (FY20e)
  • P/B: 1.6x (FY19e), 1.5x (FY20e)
  • EV/EBITDA (adj.): 9.9x (FY19e), 8.9x (FY20e)
  • Dividend Yield: 1.9% (FY19e), 2.5% (FY20e)

Outlook

• FY19: Muted outlook due to transitional pains and margin compression. Earnings are expected to be lower than FY18, but the company maintains a forecast of a 1.5 cent full year dividend.
• FY20: Positive outlook with potential earnings recovery. Improved cash flow is expected due to high operating leverage and reduced capital expenditures. The company may declare a higher dividend, potentially up to 4 cents, due to better cash flow.

Key Ratios

• ROE: 9.1% (FY19e), 9.0% (FY20e)
• ROA: 3.5% (FY19e), 3.5% (FY20e)
• Debt-to-Equity: 1.17x (FY19e), 1.05x (FY20e)
• Net Gearing: 1.10x (FY19e), 0.89x (FY20e)

Conclusion

The company is experiencing transitional challenges due to new projects coming online and higher costs, leading to a downgrade in recommendation to Neutral. While the outlook for FY20 is more positive, with potential for margin improvement and cash flow gains, the current financial performance remains below expectations. The revised target price and earnings estimates reflect the current challenges and future potential of the company.

Contact Information

• Hong Kong Representatives:

  • Benny WANG (Dealing Director): (852)22776720, bennywang@phillip.com.hk
  • ZHANG Jing (Research Analyst): (86) 2151699400-103, zhangjing@phillip.com.cn
  • Terry LI (Research Analyst): (852) 2277 6527, terryli@phillip.com.hk
  • Eurus ZHOU (Research Analyst): (852) 2277 6515, euruszhou@phillip.com.hk
  • Tracy KU (Research Analyst): (852) 2277 6516, tracyku@phillip.com.hk

• Sales Contacts:

  • Aric AU (Corporate & Institutional Sales): (852) 2277 6783, corporatesales@phillip.com.hk
  • Yoshikazu SHIKITA (International Sales): (852) 22776624, yshikita@phillip.com.hk

Disclaimer

This report is not intended to provide tailored investment advice and does not take into account individual financial situations. Investors are advised to seek financial advice before making any investment decisions. The report may not be redistributed without the express written consent of Phillip Securities (Hong Kong) Limited.