JUMBO GROUP LIMITED
42R.SI
Jumbo Group (JUMBO SP) - Earnings Affected By Higher Costs
- 1Q18 slightly below on higher-than-expected costs.
- Trim FY18-19F earnings slightly by 4-5%.
- Await contributions from franchises and partnerships to come in before turning positive.
- Maintain HOLD with lower Target Price of S$0.58.
What’s New
1Q18 slightly below.
- Jumbo Group's 1Q18 earnings of S$2m slightly trail our FY18F estimates.
- Revenue came in at S$S$35.7m (+9.3% y-o-y), driven by the group’s China operations, which saw contribution by its first Beijing and fourth Shanghai restaurants.
- Gross margins was 62.7%, flat sequentially but 1.5ppt lower than 1Q17’s 64.2% on higher raw-material and consumables costs.
- Operating profit declined 11.3% y-o-y to S$2.7m on higher opex.
Higher costs.
- Staff costs increased 12% to S$11.3m while operating lease expenses increased 8% y-o-y to S$3.5m.
- Other operating costs including depreciation and utilities also increased, albeit by a lower magnitude.
- Overall opex including other income hence increased 9.7% y-o-y to S$19.7m. Operating margins consequently fell to 7.6% (- 1.7ppt).
In expansion phase.
- We note that Jumbo is currently in an expansion phase and forming franchise as well as JV agreements regionally, while incurring higher start-up costs from opening new outlets. Costs are therefore expected to be higher until the new stores mature.
Maintain HOLD, with lower S$0.58 TP.
- We have trimmed our FY18-19F earnings by 4-5% for each year, after 1Q18 numbers trailed our forecast slightly. Our Target Price, based on 23x FY18F PE, is hence lower marginally at S$0.58.
- We look to turn positive when most of the regional franchises and partnerships contribute more positively to overall earnings.
Alfie YEO
DBS Vickers
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Andy SIM CFA
DBS Vickers
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http://www.dbsvickers.com/
2018-02-15
DBS Vickers
SGX Stock
Analyst Report
0.58
Down
0.610
