Jumbo’s bet on Hong Kong-style bistro to pay off: Maybank KimEng

Singapore two-dollar bills

Seafood restaurant group Jumbo Group’s latest joint venture agreement, this one with Tsui Wah, is a long-term positive, according to Maybank KimEng. 

The joint venture, with Jumbo to take 49 percent ownership, will enter a 10-year franchise agreement with Tsui Wah, for the rights to use the Tsui Wah brand in Singapore, the note dated Sunday said. Jumbo will then do a Singapore launch of a Hong Kong-style “Cha Chaan Teng,” which is a commonly found restaurant in Hong Kong, and known for wide-ranging and affordable menus, the note said.

The joint venture “enables Jumbo to tap into the growth potential of an established brand and leverage its own existing network of 15 restaurant outlets in Singapore,” said Maybank KimEng. 

The brokerage added that it trimmed its earnings per share forecast for 2018 by 3 percent to cover “additional start-up costs such as staff training, rental and marketing” with the new restaurant expected to start contributing revenue in the fourth quarter of 2018.

Maybank KimEng maintained a Buy rating on Jumbo, with a 12-month price target at S$0.70. 

The stock was down 0.87 percent at S$0.57 at 2:54 P.M. SGT.