JUMBO GROUP LIMITED
42R.SI
Jumbo Group - Buoyant outlook
- On track to deliver earnings growth.
- Revenue growth drivers in place, looking to increase outlets.
- Franchise model could accelerate growth further.
- Maintain BUY with marginally higher S$0.69 TP.
Positive on growth, BUY with S$0.69 TP.
- We continue to like Jumbo Group (Jumbo) for its rapid growth in China, close to 30% ROE in FY16F, relatively higher margin than peers, cash generative business, and strong net cash balance.
- We project Jumbo to deliver 27% earnings CAGR growth from FY15-18F driven by new stores and
China ramping up to better profitability.
- The group had already posted a stellar 1H16 performance with 14% and 42% y-o-y revenue and earnings growth respectively, driven by China, and is on track to record higher core earnings growth for FY16F.
- The stock currently trades at 20.3x FY17F PE, below its regional peer average of 23x and at an attractive PEG of 0.7x. Dividend yield of 3% is decent at 55% payout ratio.
Outlook continues to be buoyant.
- During our recent SGX- DBSV Consumer Corporate Access Day, we ascertained that there are earnings growth drivers in place.
- New outlets in Resorts World Singapore (RWS) and Jumbo Seafood Riverside Point are expected to come onstream in 4Q16. Jumbo Seafood Singapore’s performance was better through better ASPs and an improving lunch crowd from its executive set lunch menu.
- IFC Shanghai is already profitable after just two months of operations. Expansion plans are in place for China including a new Singapore café concept, and JV/franchise opportunities in other cities.
- It is also expanding into the catering business in Singapore.
- We factor in an increase in space from RWS’ outlet which results in a marginal increase in our TP.
Valuation:
- Pegged to peer average of 23x FY17F PE. Jumbo is trading at 20.3x FY17F PE, below peers’ 23x FY17F PE.
- We peg our valuation of Jumbo at 23x FY17F PE, in line with the peer average to derive our target price of S$0.69.
Key Risks to Our View:
- Apart from operational risks, we see failure to deliver growth in China as a key risk to our earnings growth projection.
- We primarily view Singapore’s business as stable while the bulk of the growth is driven by the China business.
Alfie Yeo
DBS Vickers
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Andy Sim CFA
DBS Vickers
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http://www.dbsvickers.com/
2016-07-01
DBS Vickers
SGX Stock
Analyst Report
0.69
Up
0.68
