CGS-CIMB raises Jumbo's target price to 40 cents

Jumbo's Singapore revenue was up 134% y-o-y

CGS-CIMB's Kenneth Tan and Ong Khang Chuen have raised their target price on Jumbo Group from 35 cents to 40 cents, with expectations that the seafood restaurant chain will enjoy further earnings growth ahead.

"We remain positive on Jumbo’s recovery trajectory ahead, with 1HFY23 results showing that Jumbo is on track for earnings to recover to pre-Covid levels by end-FY23F, in our view," state the analysts in their May 16 note.

CGS-CIMB is the only brokerage with a formal coverage of this stock.

For its 1HFY2023 ended March, the company reported earnings of $7.9 million, versus a loss of $4.5 million in the year-earlier period, when the effects of the pandemic were still apparent.

Revenue in the same period was up 73% y-o-y to $86 million, along with an improvement in gross margin to 6.1%, up 3 percentage points.

The company's Singapore operations grew particularly strongly, up 134% y-o-y, driven by the combination of the return of tourists, spending of expense accounts and menu price hikes.

Jumbo, which is diversifying its offerings with mass-market hawker food as well, enjoyed higher contributions from four new outlets under the Kok Kee wanton noodle brand.

In their May 16 note, Tan and Ong raised their FY2023 and FY2024 earnings forecast by 21 and 47% respectively, as they factor in better Singapore sales recovery and stronger-than-expected profitability.

The raised target price of 40 cents is pegged to 20 x forward FY2024 earnings.


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