SAC Capital analyst Yeo Peng Joon has kept his “buy” call on Jumbo Group 42R with a higher target price of 43 cents from 41 cents previously.
Yeo’s report on June 1 comes after Jumbo's financial results for the 1HFY2023 ended March 31.
On May 12, the food and beverage (F&B) group reported earnings of $7.9 million for the six-month period, reversing from its loss of $4.5 million in the corresponding period the year before. The figure surpassed Yeo’s expectations, forming 116% of his FY2023 forecast. It also came above the consensus estimates at 93% of its full-year forecast.
Likewise, Jumbo’s 1HFY2023 revenue, which surged by 73.3% y-o-y to $85.9 million, went beyond Yeo’s expectations at 64% of his FY2023 estimate.
Jumbo’s stellar performance was thanks to a 134% surge in its sales in Singapore. This was due to the price hikes of specific menu items, higher footfall from the country’s relaxation of Covid-19 measures and the easing of border restrictions, as well as the return of large-scale bookings, notes Yeo.
With visitor arrivals in Singapore currently at 71% of the levels seen before the onset of the Covid-19 pandemic and a lag in inbound Chinese arrivals, Yeo notes that there is still room for Jumbo to grow.
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Other positives in Yeo’s view include the group’s moves to improve sales. This includes transforming Sui Yi Gastrobar at The Riverwalk to the more popular Jumbo Seafood establishment to meet the high demand for the latter. Prior to its switch, Sui Yi Gastrobar was said to have had lacklustre sales at The Riverwalk.
The group also made an inaugural foray into halal dining with its first halal seafood restaurant, Mutiara Seafood, located at Wisma Geylang Serai. This establishment spans two floors, with the second floor capable of hosting various functions.
The newly-opened halal restaurant opens Jumbo up to a more diverse customer base, says Yeo.
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While Jumbo’s sales in China remained muted with lacklustre foot traffic on the back of a surge in Covid-19 cases in December 2022, Yeo notes that Jumbo Seafood at China’s Universal Beijing Resort (UBR) still has “ample room to expand its sales further and capitalise on the return of tourists”. Jumbo’s China sales fell by 21% y-o-y to $13.4 million although it rose by 21% on a h-o-h basis.
The group’s sales in Taiwan fell by 11% to $2.4 million in the 1HFY2023 due to a week of renovation at Jumbo Seafood in Taipei.
With this, Yeo has also upped his earnings estimates for FY2023 to FY2024 by 16% to 76%. His new target price is pegged to the group’s FY2023 ev/ebitda and P/E of 3.6x and 15.4x respectively.
“We remain upbeat on Jumbo’s prospect fuelled by essential factors that include Mutiara Seafood turning profitable, the return of international and Chinese visitors patronising their restaurants, an upswing in large-scale events and the potential for a dividend payout,” Yeo writes.
Meanwhile, he is also cognisant of headwinds such as the tightening of customers’ wallets from the cooling economic climate. Escalating operating costs such as raw materials, manpower, rent and utilities, and the ongoing manpower shortage are other downside factors.
Shares in Jumbo closed flat at 28.5 cents on June 1.
