• Jumbo Group’s strategies and growth plans remain unchanged with management looking to anchor growth in the domestic market through new outlet openings and new F&B concepts while leveraging on brand equity to expand overseas footprints.
• Maintain HOLD with a PE-based target price of S$0.41. Entry price: S$0.37.

What’s New

Updates after Taiwan ASEAN Conference.

• We recently met with JUMBO GROUP LIMITED (SGX:42R)’s management at the ASEAN Conference in Taiwan. This report highlights the key takeaways.

Stock Impact

Supplementing growth of Singapore and China operations with new outlets.

• Jumbo Group targets to open more outlets in Singapore to drive growth in Singapore operations. In the next six months, Jumbo Group intends to open one Jumbo Seafood restaurant, 1 new Teochew Cuisine outlet and 2 Tsui Wah Cha Chaan Teng outlets in Singapore.
• In addition, Jumbo Group also cited the potential opening of 1 new outlet in Shanghai and up to 2 new outlets in Beijing. Management is also exploring JVs and/or franchises in other Chinese cities such as Shenzhen and Xiamen.

JV in Korea to deepen footprint in the region.

• Jumbo Group entered into a JV with TCI Inc. , a subsidiary of Didim Inc. to introduce Jumbo Seafood into South Korea. The first Jumbo Seafood restaurant is targeted to be operational in Seoul by Sep 19.

Open to M&A opportunities.

• In addition to new outlet openings in Singapore and overseas markets, management remains open to M&A opportunities which can enhance Jumbo Group’s current brand mix or are complementary to its current business.

Earnings Revision / Risk

2019-21 earnings forecasts remain unchanged.

• We maintain our earnings forecasts as we await announcements of any conclusion of new franchises or outlet openings.
• Risks include a slowdown in sales in China and poor reception at new outlets.

Valuation / Recommendation

• Maintain HOLD with a PE-based target price of S$0.41, pegged to peers’ average 2019F PE of 20.0x. Entry price is S$0.37.

Share Price Catalyst

• Higher-than-anticipated store openings.
• Franchising deals with regional companies.

Source: UOB Kay Hian Research - 14 Mar 2019