Jumbo Group Limited - CGS-CIMB Research 2019-05-15: Results Affirmed Growth Recovery


Jumbo Group Limited - Results Affirmed Growth Recovery

  • Jumbo Group's 2QFY9/19 results within expectations, with 6M19 net profit forming 56%/56% of our/consensus full-year forecasts.
  • Higher franchise income offset revenue decline in China operations, lifting EBITDA margin up to 17.4% in 2Q19 versus 14.6% a year ago.
  • Maintain ADD with unchanged Target Price of S$0.52.

Jumbo's 2QFY9/19 net profit up 17.6% y-o-y; in line with expectations

  • JUMBO GROUP LIMITED (SGX:42R)'s reported 2Q19 net profit was S$5.0m, up 17.6% on the back of higher franchise income and revenue growth from Singapore operations.
  • Lower revenue from its China operations led to the overall 1.2% dip in 2Q19 revenue, mitigated by growth from its Singapore business and overseas franchises.
  • Jumbo Group's 2Q19 EBITDA margin lifted to 17.4%, the strongest in the past 8 quarters, as improvement resulted from a closure of underperforming outlets (which included JUMBO Seafood store at NSRCC and the JPOT outlet) in FY18.
  • The company declared an interim DPS of 0.5 Scts, representing 43% payout.

Continued growth in Singapore F&B landscape

  • Jumbo Seafood remained the core brand in its restaurant portfolio and it added two new outlets at ION Orchard and Jewel Changi Airport in the past six months.
  • Jumbo Group also recently expanded with additions of the Zui Yu Xuan Teochew Cuisine restaurant and the Chao Ting outlet at Far East Square. It is also looking to add two more Tsui Wah outlets (under 49%-51% JV) in Singapore.

Expanding overseas footprint through less risky franchises

  • The first Jumbo Seafood restaurant in South Korea is expected to begin operations in 3QFY9/19, which should add to its growing franchise income stream.
  • Jumbo Group is still looking to expand its overseas footprint mainly through franchise outlets, with possible target markets in Shenzhen, Hong Kong, Macau and Indonesia.

Maintain ADD

  • We reiterate our ADD call on Jumbo Group in view of robust growth ahead.
  • Our Target Price of S$0.52 is based on 21x FY20F P/E, slightly below regional peers’ average of 22.8x. Jumbo Group currently trades at 16.2x FY20F P/E, below peers and historical average (27.3x).
  • Upside catalysts include faster expansion of franchised outlets and better-than-expected earnings growth.
  • A key downside risk is a sharp escalation in operating costs.

Colin TAN CGS-CIMB Research | Cezzane SEE CGS-CIMB Research | https://research.itradecimb.com/ 2019-05-15
SGX Stock Analyst Report ADD MAINTAIN ADD 0.520 SAME 0.520