• Jumbo’s 3QFY18 net profit came in below expectation, representing 15.7% of our full-year estimate. Net profit declined 34.5% y-o-y as revenue growth from Chinese operations was nullified by higher input costs and operating expenses.
• Earnings will likely remain weak in FY18 as we await execution and earnings from new outlets.
• Maintain HOLD with a lower DCF-based target price of S$0.49 as we incorporate a higher risk-free rate of 2.75%. Suggested entry price: S$0.44.

3qfy18 Results

3QFY18 results below expectations.

Jumbo Group’s (Jumbo) 3QFY18 net profit of S$2.2m (-34.5% y-o-y) was below our expectation. Revenue grew to S$35.8m (or +2.9% y-o-y) and the increase was attributed to operations in China (+S$1.8m y-o-y) but this was partially offset by weakness from Singapore operations (-S$0.8m y-o-y).

Attributable net profit declined (-S$1.2m or 34.5% y-o-y) due to higher promotional expenses and higher salaries to support new outlets and more promotional activities.

Source: UOB Kay Hian Research - 14 Aug 2018