CGS-CIMB started Jumbo Group at Add with a S$0.62 target price, calling the established chilli crab purveyor a highly profitable “seafood treasure.”
“Established in 1987, the Jumbo Seafood brand is known for its ‘Singapore Chilli Crab’ and ‘Black Pepper Crab’ dishes that appeal to both locals and tourists in Asia,” it said in a note on Friday.
Jumbo operates 13 F&B outlets in Singapore under five restaurant brands, Jumbo Seafood, JPOT, Ng Ah Sio Bak Kut Teh, Chui Huay Lim Teochew Cuisine and J Cafe, it noted, adding it also has one franchised outlet in Taiwan and another in Vietnam.
CGS-CIMB also pointed to the company’s expansion prospects.
“With the upcoming 2019 launch of Jewel Changi Airport (a 10-storey complex that will house more than 300 shops and F&B outlets in Changi Airport), we think Jumbo may open a sixth Singapore Jumbo Seafood outlet there,” it said. “We think the Jewel outlet could yield S$12 million in annual sales by fiscal 2020 due to high tourist traffic flow and ‘novelty effect’ that will attract throngs of shoppers and diners to the new retail complex.”
It also said China was a key growth market, adding the pace of new restaurant openings there could pick up as it expands to other major cities beyond Shanghai.
“Coupled with its stable F&B business in Singapore, we believe Jumbo’s continued expansion overseas would support our 9.3 percent revenue CAGR forecast over fiscal 2017-20,” it said. CAGR stands for compound annual growth rate. It forecast a three-year earnings per share CAGR of 13.9 percent over 2017-20.
CGS-CIMB also noted the company entered a joint venture with Hong Kong-listed Tsui Wah Holdings to bring the Tsui Wah eatery to Singapore, with the first outlet opening this month in Clarke Quay.
“We believe the outlet will do very well in Singapore, like it has in Hong Kong, Macau and China. Further expansion in the country will present an additional income stream for the group in fiscal 2019 onwards,” it said.
The stock ended Monday up 1.0 percent at S$0.51.