Jumbo Group - DBS Research 2017-05-15: Dragged By Singapore Operations

Jumbo Group - DBS Vickers 2017-05-15: Dragged By Singapore Operations JUMBO GROUP LIMITED 42R.SI

Jumbo Group - Dragged By Singapore Operations

  • 2Q17 earnings below on lower than expected margins.
  • Interim dividend of 0.5 Scts declared.
  • Cut FY17-18F earnings by 3-10%.
  • Maintain HOLD and S$0.72 TP.

What’s New 

2Q17 below. 

  • Jumbo reported 2Q17 earnings of S$5.9m (+0.3% y-o-y), below our expectations. 
  • While revenue of S$39.4m (-0.6% y-o-y) was in line, gross and operating margins were lower than our forecasts even though gross and operating margins improved on a y-o-y basis. 1H17 earnings of S$8.5m accounted for 42% of our original S$20.2m forecast. 
  • Jumbo declared an interim dividend of 0.5 Scts, in line with our expectations. 
  • 2Q17’s revenue decline was led by a decrease in Singapore revenue, offset by growth in Shanghai revenue. 
  • The key disappointment was lower than expected gross margins of 63.9% vs our 64.5% expectation, led by lower sales contribution of higher margin Singapore operations.

Weak outlook. 

  • According to the Singstat’s F&B services index, the sector has been weak with March 2017’s index reading declining to a low of 92.6 from a peak of 99.7 in September 2016. Outlook for Singapore therefore remains challenging. 
  • Overseas developments continue to be positive with the opening of its first Vietnam franchise in May 2017 and recently signed JV with Beijing Hualian group to open the first Jumbo Seafood outlet in Beijing by 3Q17.

Maintain HOLD, TP S$0.72. 

  • In line with lower 2Q17 earnings, we trimmed our FY17-18F earnings by 3-10%.
  • Maintain HOLD with S$0.72 TP based on 23x blended FY17/18F EPS

Alfie YEO DBS Vickers | Andy SIM CFA DBS Vickers | http://www.dbsvickers.com/ 2017-05-15
DBS Vickers SGX Stock Analyst Report HOLD Maintain HOLD 0.720 Same 0.720