Core earnings missed; Cut FY18-20E EPS and TP
Core earnings during 6M18 missed our and consensus estimates by 10- 12%. 2Q18 earnings fell 27% YoY, mainly due to marketing and expansion costs, including higher-than-expected staff costs and other operating expenses at its HQ office in China. On the bright side, 2Q18 revenue continued to grow by 6% YoY from two new outlets in China. We cut our FY18-20E EPS by 20-24% in anticipation of higher staff costs for further expansion. Accordingly, our DCF-based TP fell 7% to SGD0.65 (WACC 9%, LTG 2%), implying multiples of 33x/26x FY18/19E EPS. Despite the earnings weakness, we continue to like Jumbo's established brand and scalable business model.