800 Super Holdings Ltd: Stable operating cash flow and dividends ahead August 25, 2017 2129

PSR Recommendation: BUY Status: Upgraded
Target Price: 1.53
  • FY17 revenue in line with our expectation
  • FY17 PATMI missed our expectation by 5.1% on higher than expected income tax expense
  • Positive surprise of 3.0 cents final dividend, higher than FY16’s 2.5 cents final dividend
  • Full year dividend of 4.0 cents (FY16: 2.5 cents)


The positives

  • Higher revenue and profit, in contrast to listed-competitor. Listed-competitor, Colex Holdings Limited reported 0.8% lower YoY revenue and 17% lower YoY profit to equity holders for the same 12-month period of 1 July 2016 to 30 June 2017.
  • Positive surprise of higher than expected final dividend. We were expecting only 2.5 cents final dividend in view of the capital commitments for the ongoing projects. FY17 payout ratio of 42% is higher than FY16 payout ratio of 27%.
  • Projects are on track for completion. The waste to energy (WTE) plant is near completion and expected to be operational by end-2017. The sludge treatment facility is targeted for completion in 2Q 2018.

The negatives

  • Higher than expected income tax expense. This was due to an under-provision of prior year’s deferred tax. FY16 income tax expense was lower mainly due to write-back of over-provision of prior year’s income and deferred tax.


The outlook is stable. We are expecting some near-term weakness in PATMI over the following two FYs. This is due to the higher depreciation expense from the WTE plant and sludge treatment facility when they are completed, but initially under-utilised during their respective ramp-up periods. However, cash flow from operations is expected to remain stable. Consequently, 4.0 cents dividend is sustainable going forward. We expect free cash flow in FY18e to be negative, due to capital expenditure for the sludge treatment facility. We see PATMI picking up in FY20e.

Key catalyst to look out for is the tender in 3Q 2017 for the Public Waste Collection (PWC) contract for the consolidated Bedok and Pasir Ris-Tampines sectors, where SembWaste and Veolia are the respective incumbents.

Upgrade to Buy from Accumulate; lower target price of S$1.53 (previously S$1.57)

We have adjusted our FY18e/FY19e earnings 17%/20% lower than previous, due to ramp-up period for the new projects. We also have a lower WACC of 6.6% (previously 7.0%). Our target price gives an implied FY18e forward P/E multiple of 16.9x. This compares against the Straits Times Index 12-month forward P/E multiple of 14.7x.


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About the author

Profile photo of Richard Leow

Richard Leow
Research Analyst
Phillip Securities Research Pte Ltd

Richard covers the Transport Sector and Industrial REITs. He graduated with a Master of Science in Applied Finance from the Singapore Management University. He holds the CFTe and FRM certifications and is a CFA charterholder.

He was ranked #2 Top Stock Picker (Asia) for Real Estate Investment Trusts in the 2018 Thomson Reuters Analyst Awards, and ranked #2 Top Stock Picker (Singapore) for Resources & Infrastructure in the 2016 Thomson Reuters Analyst Awards.

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