Jumbo Group Limited - CGS-CIMB Research 2018-12-13: New Jumbo Seafood At ION

JUMBO GROUP LIMITED (SGX:42R)

Jumbo Group Limited - New Jumbo Seafood At ION

The company opened a new JUMBO Seafood outlet in a prime shopping mall in Singapore ahead of its seasonally strong Jan-Mar quarter in 2019.
We expect the store to yield profit margins similar to other Singapore JUMBO Seafood stores amid favourable rental cost secured at the mall.
Maintain ADD.

The company has announced the opening of a new JUMBO Seafood outlet at ION Orchard, a premier shopping mall along the prime Orchard Road shopping belt in Singapore.
The outlet opens before its seasonally strong Jan-Mar quarter (2QFY9/19), which historically fetches c.27-29% of full-year sales for the group.
The ION Orchard store occupies a total floor space of over 5,400 sq ft, with a seating capacity of 160, including 4 VIP rooms.
The total JUMBO Seafood store count has expanded to 17 across Asia, with six in Singapore.

Despite the store’s location at a prime shopping mall, we understand from management that JUMBO has secured the retail space at a favourable rental cost and it could see profit margins similar to other Singapore JUMBO Seafood outlets apart from the one at the National Service Resort & Country Club.
The group’s overall rental costs accounted for c.10% of total operating costs in FY9/18, lower than the national average of 17.9% in 2016.

We maintain our ADD call in view of robust earnings growth in FY19F and possible margin uplift on tighter cost control.
Our Target Price remains unchanged at S$0.54, pegged to 21x FY20F P/E, marginally below regional peers’ average of 22x.
Upside catalysts could include better-than-expected earnings growth and significant uplift in margins.
Downside risks include a slowdown in store sales and operational cost escalation on a per-store basis.

Colin TAN CGS-CIMB Research | Cezzane SEE CGS-CIMB Research | https://research.itradecimb.com/ 2018-12-13

SGX Stock Analyst Report ADD MAINTAIN ADD 0.540 SAME 0.540