• 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.

First JUMBO Seafood Outlet Opening in Singapore in 10 Years

• 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 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.

Favourable Rental Cost Despite Prime Shopping Mall Location

• 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 10% of total operating costs in FY9/18, lower than the national average of 17.9% in 2016.

Maintain ADD and Target Price of S$0.54

• 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.

Source: CGS-CIMB Research - 13 Dec 2018