SINGAPORE (Mar 12): Maybank Kim Eng is maintaining its “buy” call on Jumbo Group with a target price of 70 cents.
This came on the back of the group on Friday announced that it has entered into a joint venture (JV) with Hong Kong’s Kang Wah Holdings to bring the Tsui Wah brand of “cha chaan teng” to Singapore.
See: Jumbo in JV to bring HK-style 'cha chaan teng' to Singapore
Currently, there are about 70 Tsui Wah outlets globally with most it if concentrated in Hong Kong and China. This JV will be its first entry into the Asean market.
The JV will first open one outlet in mid-2018 to test the market before planning further expansion.
In a Sunday report, analyst John Cheong says, “We think this is a long-term positive as it adds another scalable brand into Jumbo’s portfolio and could leverage its established network in Singapore.”
However, the group will incur start-up costs with the opening of new outlets, hence the analyst trims the FY18 EPS by 3% and expects the new restaurant to only contribute to revenue around 4Q18.
The group will inject $245,000 into the JV vehicle, which has signed a franchise agreement of 10 years for the right to use the Tsui Wah brand name in Singapore.
Upon launching the Tsui Wah brand in Singapore, Jumbo would have a total of six F&B brands locally.
“We view this JV positively as it enables Jumbo to tap into the growth potential of an established brand and leverage its own existing network of 15 restaurant outlets in Singapore,” says Cheong.
As at 1.05pm, shares in Jumbo are trading 2 cents higher at 57 cents or 21 times core earnings with a dividend yield of 3.3%.
