December 12, 2017
Jumbo Group Ltd (JUMBO SP) BUY Time for Tasty Re-Rating Share Price SGD 0.58 12m Price Target SGD 0.70 (+22%) Previous Price Target SGD 0.66
Expansion catalysts; BUY Company Description We resume coverage of JUMBO with a contrarian BUY and DCF TP of F&B retailer in Singapore and China, most famous for its chilli crabs and JUMBO Seafood brand. Has five SGD0.70 (WACC 9%). Our TP implies 26x FY18E EPS, on par with regional other brands in its stable. F&B peers. Leveraging its reputation and consistent quality, JUMBO aims to open 4-5 new outlets a year in FY18-20E, up from just one historically. Rapid profitability in just one month for its Beijing outlet opened in Jul Statistics 2017 demonstrates the Chinese consumer’s confidence in its brand and 52w high/low (SGD) 0.78/0.54 JUMBO’s execution ability, in our view. We expect catalysts from a 3- 3m avg turnover (USDm) 0.4 year EPS CAGR of 15%, backed by: 1) more new outlets; 2) low upfront Free float (%) 18.2 costs for expansion through JVs and franchises; and 3) operating Issued shares (m) 641
leverage. Risks include execution missteps or delays. Market capitalisation SGD368.9M ConsumerStaples USD273M More new stores in China, Taiwan & Vietnam Major shareholders: JUMBO has gained a foothold in China with its consistent quality. China JBO Holdings Pte Ltd. 57.9% contributed 18% or SGD25m to its FY17 revenue, up from 6% or SGD7m in SIM CHYE HOCK 10.0%
FY14. We expect contributions to exceed 30% by FY20E. Since 2014, TAN GEE JIAN 6.6%
JUMBO has been adding one new outlet a year. Outside China, it now Price Performance
aims to expand through franchises and JVs, which should allow it to 0.800 280 harness the strength of its value-adding partners and reduce upfront 0.750 260 costs. It started its first franchise in Vietnam in May 2017. It plans to 0.700 240
Singapore open a second in Hanoi with a local F&B partner. It has formed a JV and 0.650 220 franchises to open at least eight outlets in Taiwan. On top of that, it has 0.600 200 identified five other potential markets: Thailand, Indonesia, Hong Kong, 0.550 180 Macau and Korea. 0.500 160 0.450 140 Foundation laid for new EPS growth 0.400 120 0.350 100 EPS growth should resume in FY18E, from more new outlets overseas and Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 operating leverage to cover additional head-office costs since FY17. To support its regional expansion, JUMBO had shifted to bigger head offices Jumbo Group Ltd - (LHS, SGD) Jumbo Group Ltd / Straits Times Index - (RHS, %) in Singapore and China in FY17. Most start-up costs had been recognised, -1M -3M -12M when two new outlets in China were opened in late FY17 and early FY18. Absolute (%) (4) 6 (8) Undervalued despite superior ROEs & net margins Relative to index (%) (4) 0 (21) JUMBO trades at 21x FY18E EPS, a discount to regional peers’ 26x, Source: FactSet despite its superior ROEs and margins. We use DCF valuation to capture the full value of its expansion potential that could materialise over more than a year. Our TP implies 26x FY18E EPS, on par with regional peers. Fast adding new Jumbo seafood outlets to boost earnings
Singapore outlets China outlets FYE Sep (SGD m) FY16A FY17A FY18E FY19E FY20E (No.) (SGD m) Taiwan outlets Franchise outlets Revenue 137 145 164 189 208 25 25 Core earnings (RHS) 22.3 EBITDA 22 22 26 30 33 20.0 22 Core net profit 16 14 17 20 22 20 4 20 Core EPS (cts) 2.4 2.3 2.7 3.1 3.5 17.4 18 Core EPS growth (%) 32.0 (6.7) 20.1 14.8 11.7 15.5 14.5 13.8 3 4 Net DPS (cts) 1.7 1.7 1.9 2.2 2.4 15 13.3 14 15 2 Core P/E (x) 23.8 25.5 21.2 18.5 16.5 2 P/BV (x) 5.7 5.7 5.2 4.8 4.4 10 1 Net dividend yield (%) 3.0 3.0 3.3 3.8 4.2 10 8 1 7 8 10 ROAE (%) 25.5 22.3 25.6 27.2 27.9 6 4 ROAA (%) 18.3 17.1 19.8 20.5 20.8 2 3 5 1 5 EV/EBITDA (x) 15.0 14.5 12.0 10.9 9.8 6 6 Net gearing (%) (incl perps) net cash net cash net cash net cash net cash 5 5 5 5 5 Consensus net profit - - 17 18 18 0 0 MKE vs. Consensus (%) - - 3.9 8.3 22.5 FY14 FY15 FY16 FY17 FY18E FY19E FY20E
Source: Company, Maybank Kim Eng
John Cheong, CFA [email protected] (65) 6231 5845
THIS REPORT HAS BEEN PREPARED BY MAYBANK KIM ENG RESEARCH Co. Reg No: 198700034E MICA (P) : 099/03/2012 SEE PAGE 23 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS Jumbo Group Ltd
1. Investment Summary
Accelerating growth in traditional markets: Singapore and China
JUMBO is a leading restaurant operator in Singapore, which accounts for more JUMBO aims to open more stores starting in FY18 than 80% of its revenue. Signature dishes at its eponymous seafood restaurants (Year ended Sep) FY16 FY17 FY18E FY19E FY20E are the Singapore chilli crabs and black-pepper crabs. After entering China in Additional no. of outlets 1 3 5 4 4 Total 17 20 25 29 33 2013, China has become its star market. China contributed 18% to its FY17 Jumbo (total) 8 10 14 18 22 revenue, up from just 6% in FY14. After building up its brand, local knowledge - Singapore 5 5 5 6 6 and connections in its first city, Shanghai, JUMBO is turning more aggressive. It - China 3 4 6 7 8 - Taiwan (JV/franchise) 1 2 4 has moved out to Beijing, with plans to open more than one outlet a year in - Franchise 1 2 3 4
China. We expect JUMBO to open two new outlets in China in FY18E, which could Ng Ah Sio Bak Kut Teh 4 6 7 7 7 lift China’s revenue contributions beyond 30% in FY20E. Singapore remains its Chui Huay Lim Teochew 1 1 1 1 1 JPOT 3 2 2 2 2 cash cow, at more than 80% of group revenue in FY17. Singapore’s typical Jcafe 1 1 1 1 1
revenue growth of 4-11% YoY pa slowed to just 2% in FY17, caused by the closure Source: Company, Maybank Kim Eng of a JPOT outlet at Parkway Parade. We expect a return to high-single-digit growth from FY19, when JUMBO opens two new outlets: one Ng Ah Sio Bak Kut Teh in FY18 and one Jumbo seafood in FY19.
Entering new markets with low-risk, low-cost JVs & franchises Beyond its traditional markets, JUMBO aims to form franchises and JVs in other Asian markets. It started its first franchise in Vietnam in May 2017. It plans to open a second in Hanoi with a local F&B partner. It has formed a JV and franchises to open at least eight outlets in Taiwan. We expect one new outlet in Taiwan each in FY18-19E, followed by two more pa in the next three years after gaining market familiarity. JVs and franchises should reduce the risk of failure for JUMBO as it harnesses the strength of its value-adding partners and cut upfront costs. JUMBO will receive 3-5% of revenue from its franchisees and a 49% share of earnings from its JV outlets. It has identified five other potential markets: Thailand, Indonesia, Hong Kong, Macau and Korea. There is also potential to scale up non-Jumbo brands, including Ng Ah Sio Bak Kut Teh and Chui Huay Lim Teochew cuisine.
Foundation laid for new EPS growth In FY17, JUMBO incurred considerable upfront costs for its regional expansion. It shifted to bigger head offices in Singapore and China and added headcount. The bulk of its upfront costs for two new China outlets was also incurred in FY17. These were opened in late FY17 and early FY18. Starting FY18E, we believe earnings growth will resume, from: 1) more new outlets overseas; and 2) operating leverage to cover increased head-office expenses.
Undervalued JUMBO trades at 21x FY18E P/E, a discount to domestic peers’ 24x average. But we believe these are not good comparables due to Singapore’s smaller market. We think regional peers provide better comparisons, especially in view of JUMBO’s regional-expansion plans. They trade at 26x on average. Despite range- topping ROEs and margins, JUMBO trades at discounts to these peers. Our DCF TP of SGD0.70 implies 26x FY18E EPS, on par with them. We believe our valuation is conservative, as we have assumed 1x beta vs Bloomberg’s 2-year beta of 0.6x to account for execution risks in its aggressive overseas expansion.
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Jumbo Group Ltd
2. Focus Charts
Fig 1: Outlets to accelerate from FY18E onwards Fig 2: China is JUMBO’s chief source of growth. Its revenue contributions could exceed 30% by FY20E. (No.) (SGD m) 35 33 Singapore China Others (Taiwan & Vietnam)
250 29 30 25 200 2 25 1 20 Thousands 41 (25%) 64 (31%) 25 (18%) 54 (29%) 20 17 150 20 (15%) 16 10 (9%) 15 100 10 134 142 117 119 122 50 112 5
0 0 FY15 FY16 FY17 FY18E FY19E FY20E FY15 FY16 FY17 FY18E FY19E FY20E
Source: Company, Maybank Kim Eng Source: Company, Maybank Kim Eng
Fig 3: Gross margins to expand with scale and automation. Fig 4: Earnings growth to resume in FY18E, from more new EBIT margins fell in FY17 due to expansion costs profitable outlets, mainly via JVs and franchises. These lower upfront costs and eliminate the need for one-off costs 65% Gross margin (LHS) EBIT margin (RHS) 18% (SGD m) 3Y EPS CAGR (FY17-20E): 15% 64% 17% 25.0 22.3 64% 16% 20.0 63% 15% 20.0 17.4 63% 14% 15.5 15.0 13.8 14.5 62% 13% 13.3 62% 12% 10.0 61% 11% 61% 10% 5.0 60% 9%
60% 8% - FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E FY14 FY15 FY16 FY17 FY18E FY19E FY20E
Source: Company, Maybank Kim Eng Source: Company, Maybank Kim Eng
Fig 5: Superior net margins through pricing power and cost Fig 6: Peer comparisons management, supporting superior ROEs 3Y EPS ROE Net P/E PEG Flagship brands: (Avg 3Y Net Margin) CAGR (%) margin Jumbo - JUMBO SEAFOOD 12.0 Hist FY1 FY2 (%) (x) FY1 FY1 Japan Foods - Ajisen Ramen Jumbo ABR - Swensen's, Gloria Jean's Coff. 10.0 Jumbo 26 21 19 15 1.3 26 10.6 Soup Restaurant - SOUP BreadTalk - Din Tai Fung, Carl's Jr 8.0 ABR Holdings Singapore peers 26 24 21 22 0.8 16 2.6 Sakae Holdings - Sakae Sushi Japan Foods Tung Lok - TungLok, Lao Beijing 6.0 Regional peers 30 26 23 17 1.2 14 8.5
4.0 Soup Restaurant 2.0 BreadTalk Total average 28 25 22 19 1.0 15 5.6 Tung Lok (Avg 3Y ROE) 0.0 Source: Bloomberg, Maybank Kim Eng
(20.0) (10.0) (2.0)0.0 10.0 20.0 30.0 (4.0) Sakae Holdings (6.0) (8.0)
Source: Bloomberg, Maybank Kim Eng
December 12, 2017 3
Jumbo Group Ltd
3. Accelerating Growth in Traditional Markets
JUMBO aims to open 4-5 new stores each year in FY18-20, including franchise stores. This is more than its one store pa before FY17. JUMBO started to open more outlets in FY17, adding three.
In China, we expect two new outlets in FY18E, as JUMBO expands outside its beachhead of Shanghai. Although Singapore is its cash cow, JUMBO did not open any outlet here in the past three years, as it was busy with strengthening its presence in China and preparing for its IPO in Nov 2015. This is set to change. It plans to open one Ng Ah Sio Bak Kut Teh outlet in FY18E and one Jumbo seafood outlet in FY19E. We have not factored in new outlets for its other brands.
Fig 7: JUMBO aims to open more stores pa from FY18 onwards (Year ended Sep, no. of outlets) FY14 FY15 FY16 FY17 FY18E FY19E FY20E Additional no. of outlets 1 1 3 5 4 4 Total 15 16 17 20 25 29 33 Jumbo (total) 6 7 8 10 14 18 22 - Singapore 5 5 5 5 5 6 6 - China 1 2 3 4 6 7 8 - Taiwan (JV/franchise) 1 2 4 - Franchise 1 2 3 4
Ng Ah Sio Bak Kut Teh 4 4 4 6 7 7 7 Chui Huay Lim Teochew Restaurant 1 1 1 1 1 1 1 JPOT 3 3 3 2 2 2 2 Jcafe 1 1 1 1 1 1 1
Source: Company, Maybank Kim Eng
Fig 8: Estimated revenue per outlet (Year ended Sep, figures in SGD’000) FY14 FY15 FY16 FY17 FY18E FY19E FY20E Jumbo - Singapore 17,915 19,174 20,018 20,164 20,495 18,814 20,178 - China 6,529 5,232 6,657 6,344 6,822 7,780 8,021 - Taiwan - - - - 3,564 3,635 4,017 - Franchise - - - - 172 223 262 Ng Ah Sio Bak Kut Teh 1,033 1,043 1,054 811 853 1,025 1,035 Chui Huay Lim Teochew Restaurant 7,023 7,093 7,164 7,236 7,308 7,381 7,463 JPOT 1,534 1,549 1,565 2,371 2,394 2,418 2,443 Jcafe 541 546 552 557 563 569 574
Revenue per outlet for Singapore declined in FY19E due to opening of a new outlet, which will take time to reach steady state. Source: Company, Maybank Kim Eng
Fig 9: Revenue by region: China will be the key growth driver, supplemented by franchises (Year ended Sep, SGD’000) FY14 FY15 FY16 FY17 FY18E FY19E FY20E Total 112,404 122,795 137,808 145,103 163,673 189,418 208,192 Singapore 105,875 112,332 116,781 119,373 122,291 134,073 142,498 (As a % of total) (82%) (75%) (71%) (68%) China 6,529 10,463 19,971 25,378 40,932 54,457 64,165 (As a % of total) (18%) (25%) (29%) (31%) Taiwan (JV/franchise) - - - - 107 218 482 Franchise (Vietnam) - - - 353 343 670 1,046
Source: Company, Maybank Kim Eng
December 12, 2017 4
Jumbo Group Ltd
3.1 Ample room in China
Limited by Singapore’s small market, many home-grown F&B entrepreneurs have forayed overseas through JVs, franchises or owned outlets. For many, their first stop tends to be China, since:
China offers size and growth, especially for full-service restaurants. Chinese consumerism and urbanisation have been stimulating demand for F&B services. Full-service restaurants such as JUMBO’s four seafood outlets typically fare well in big cities such as Shanghai, which house many expats plus a big and growing affluent middle class. These restaurants accounted for the largest share or 76% of China’s USD539b F&B industry in 2016, according to ACMR-IBISWorld. The market has grown by an 11% CAGR since 2013.
Singapore-style cuisine works in China. Singapore’s cuisine appears to have been warmly embraced by the Shanghainese. Its sweetish, lightly-spicy taste appeals to the Shanghainese palate, whose food is equally light-tasting. Moreover, Shanghainese have their specialty hairy crabs and are used to eating crabs. Unlike hairy crabs which come into season only in Oct-Dec, JUMBO’s crabs are Sri Lankan crabs which are available all year round. Based on its learning curve in Shanghai, management successfully opened its first Beijing outlet in Jul 2017. This broke even at the EBITDA level in its first month of operation.
Breakeven period has shortened
A new JUMBO outlet in China used to take 9-12 months to reach profitability, with payback after three years. These metrics have improved along with: 1) its more established brand name since 2014; 2) the use of social-media marketing such as gathering reviews on www.dianping.com. This is China’s equivalent of www.hungrygowhere.com, a popular restaurant-review website in Singapore; and 3) access to good locations via its partnerships with large mall operators. JUMBO’s two recent China outlets, its IFC and Beijing outlets in 2016 and 2017, managed to break even at the EBITDA level in 1-2 months.
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Jumbo Group Ltd
Rated better than No Signboard & highly by the Chinese Based on information extracted from www.dianping.com, JUMBO’s restaurants in Singapore and China are rated highly for their taste, environment and service. In Singapore, they are rated much better than those of JUMBO’s closest listed peer, No Signboard (NSB SP; NOT RATED). JUMBO’s restaurants are ranked five stars for four-out-of-five restaurants in Singapore vs three for No Signboard. This is despite JUMBO’s lower average price per person of CNY341-559 vs CNY395-790. NSB was listed on SGX in Nov 2017, at 13.9x FY16 P/E. It operates four outlets in Singapore. We believe JUMBO could justify better valuation than No Signboard’s 13.9x for its size, popularity ranking and overseas expansion record.
Fig 10: JUMBO’s outlets vs other players Rating Avg spend/person Taste Environment Service Restaurant No. of reviews (stars) (CNY) (score out of 10) (score out of 10) (score out of 10) Jumbo Singapore East Coast 5.0 919 406 9.2 9.2 9.1 Dempsey 5.0 203 341 9.3 9.2 9.2 Riverside Point 5.0 1,246 504 9.2 9.1 9.1 Riverwalk 5.0 2,951 477 9.3 9.1 9.1 National Service Resort 4.5 39 559 8.5 8.5 9.0
Jumbo China Shanghai IAPM 5.0 7,149 384 9.0 9.0 8.8 Shanghai IFC 5.0 1,837 486 9.1 9.0 8.5 Shanghai Raffles City 4.5 6,445 287 9.0 8.7 8.8 Beijing SKP 5.0 482 474 9.1 9.0 8.7 Shanghai L’Avenue Mall 5.0 45 360 9.0 9.2 9.3
No Signboard Singapore Esplanade 4.5 923 699 8.9 9.0 7.3 Clarke Quay 3.5 209 790 7.7 8.0 7.1 Vivocity 5.0 615 503 9.2 9.2 9.1 Geylang 5.0 407 395 9.1 8.0 8.8
Others Singapore Seafood Republic 5.0 1,149 336 9.3 9.2 9.2 Lau Pa Sat 5.0 892 300 8.9 7.5 8.0 Melben Seafood AMK 5.0 693 396 9.3 9.1 9.1 Long Beach UDMC 5.0 195 591 9.2 9.2 9.2 Long Beach Dempsey 5.0 78 571 9.2 9.0 9.1
Source: http://www.dianping.com (extracted on 12/12/2017)
With its consistent addition of one new outlet a year in China, revenue contributions from China leapt from 6% in FY14 to 18% in FY17. We expect 25% in FY18E, mainly from near-full-year contributions from three new outlets: 1) Beijing SKP, which started in Jul 2017; 2) L’Avenue Mall branch in Shanghai, which started in Nov 2017; and 3) Xi Ann SKP, which will start in 1H18.
Fig 11: Jumbo seafood restaurants in China Seating capacity GFA (sf) Opened in
- IAPM Mall, Shanghai 250 12,239 2013 - Raffles City, Shanghai 200 7,368 Aug 2015 - IFC Mall, Shanghai 150 6,997 Jan 2016 - SKP Mall, Beijing 158 6,500 Jul 2017 - L’Avenue Mall, Hongqiao, Shanghai 212 8,826 Nov 2017
Source: Company data
December 12, 2017 6
Jumbo Group Ltd
4. New Markets
4.1 Refining its business for next phase
JUMBO so far has been able to:
1) Scale up, as it builds on its Jumbo seafood brand.
2) Maintain consistent food quality amid expansion. It relies on central kitchens to produce important ingredients such as sauces and marinated food. It is also selective with partners and markets.
3) Maintain net margins and earnings growth amid expansion. Management has tested various expansion modes, including wholly-owned outlets, partnerships and franchising. It adopts different modes based on its degree of familiarity with its markets. It has been able to deliver good results partly thanks to its willingness to tie up with players with more experience in China. The latter include: 1) BreadTalk (BREAD SP; NOT RATED), another major F&B player in Singapore with experience in China’s bakery and restaurant markets. BreadTalk holds a 30% stake in JUMBO’s Shanghai operations; and 2) unlisted Beijing Hualian Group, the operator of the Beijing SKP mall, where JUMBO’s Beijing outlet is located. Beijing Hualian is a major mall operator in China with a focus on supermarkets and retail stores. It owns 49% of JUMBO’s Beijing SKP outlet.
JUMBO intends to establish more seafood outlets in Singapore and other Chinese cities such as Shenzhen and Xi’an. It will expand in China either through acquisitions, JVs, franchises or strategic alliances. Fig 12: Five-year plan to open outlets in China, Singapore and Taiwan (2018- 2022) Current Target China Shanghai 4 Jumbo Seafood Possible 1-2 new outlets Beijing 1 Jumbo Seafood Possible 1-2 new outlets Shenzhen - Possible 1 Jumbo Seafood outlets Xi’an - Possible 1 Jumbo Seafood outlets Other cities - Joint ventures and/or franchises
Singapore 5 Jumbo Seafood and 1 Teochew Possible 1 Jumbo Seafood and 1 Teochew
Taiwan - At least 8 Jumbo Seafood outlets
Source: Company
December 12, 2017 7
Jumbo Group Ltd
4.2 Breaking into Taiwan & Vietnam
Beyond China and Singapore, JUMBO has an ambitious target to open at least eight seafood outlets in Taiwan. This could double is total seafood outlets to 18, assuming no forays into other countries. JUMBO has secured a strategic partner, unlisted Baipin, which has a track record of introducing Michelin-star restaurants to Taiwan. The latter included Hong Kong’s “TimHoWan”, Japan’s “Tsuta” and Singapore’s “Hawker Chan”. JUMBO will expand in Taiwan via franchises and this JV. It will receive 3-5% of revenue from its franchisees and 49% of the earnings of its Taiwanese JV outlets. This approach should reduce the risk of failure for JUMBO as it harnesses the strength of its value-adding partners and reduce upfront costs. Sharing the topline of its franchisees also reduces earnings risks from marketing and start-up costs to promote awareness in new markets.
JUMBO also started its first franchise in Vietnam in May 2017, with a property- related player. In FY18, it plans to open a second in Hanoi with an F&B partner.
JUMBO has identified five more potential markets: Thailand, Indonesia, Hong Kong, Macau and Korea. Apart from its seafood brand, JUMBO hopes to open two Bak Kut Teh outlets and a Teochew cuisine outlet in Singapore in the next few years. It is also on the lookout for acquisition opportunities, particularly of F&B brands which complement its current businesses.
4.3 Central kitchen raises efficiency, consistency and quality
JUMBO’s existing 10k sf central kitchen in Singapore supplies its local and China outlets. Although located in the same building as its corporate offices and other kitchens, its premises are not owned by JUMBO. JUMBO intends to utilise SGD11.5m or 29% of its IPO proceeds to bring all its operations under one roof in acquired premises. In China, Jumbo has a small facility for marinating ingredients, although its all-important pastes and spices are imported from Singapore to protect its recipes. It also imports live crabs and essential herbs such as lemongrass from Singapore. At some point, it may expand this kitchen.
JUMBO’s central kitchens in Singapore and China prepare sauces and marinades, process certain food ingredients and roll out semi-finished food products such as marinated meats for its outlets. This way, quality and taste are controlled and standardised. According to management, it does not need to station a master chef at each outlet as its central kitchens are able to standardise its critical ingredients and food preparations.
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Jumbo Group Ltd
5 Financial Analysis
5.1 Foundation laid in FY17
In FY17, JUMBO’s earnings were down 7% YoY despite revenue growth of 6%. The culprits were considerable upfront costs for its regional expansion and start-up costs in China. These were reflected in a 17% YoY increase in its operating-lease expense and 30% YoY increase in depreciation expense. Expansion and one-off costs came from: 1) JUMBO’s shift to bigger head offices in Singapore and China and increased headcount; and 2) upfront costs for its two new China outlets, largely incurred during their opening in late FY17 and early FY18.
5.2 EPS growth to accelerate from FY18E
Revenue growth of 6% in FY17 was its lowest in five years, which ranged from 6- 15%. This was due to: 1) no meaningful contributions from new stores, as its new Beijing SKP Jumbo seafood outlet only opened in 3Q17. Its new Vietnamese outlet was also opened by a franchisee only in 2Q17 and contributed very little; 2) the closure of a JPOT outlet in 3Q17 at Singapore’s Parkway Parade due to slow traffic; 3) smaller floor space at its East Coast seafood outlet following regulatory restrictions on table placement outside its store; and 4) the expansion of its lower-profitability Ng Ah Sio Bak Kut Teh brand, with the opening of two outlets.
Starting FY18E, we believe earnings growth will resume, from: 1) two new China outlets: Beijing SKP and a fourth Shanghai outlet to be opened in Dec 2017; 2) operating leverage to cover increased head-office expenses; and 3) the absence of one-off expenses.
Fig 13: Sources of revenue growth: UMBO aims to open more stores pa from 2018 onwards (Year ended Sep) FY14 FY15 FY16 FY17 FY18E FY19E FY20E Additional no. of outlets 1 1 3 5 4 4 Total 15 16 17 20 25 29 33 Jumbo (total) 6 7 8 10 14 18 22 - Singapore 5 5 5 5 5 6 6 - China 1 2 3 4 6 7 8 - Taiwan (JV/franchise) 1 2 4 - Franchise 1 2 3 4
Ng Ah Sio Bak Kut Teh 4 4 4 6 7 7 7 Chui Huay Lim Teochew Restaurant 1 1 1 1 1 1 1 JPOT 3 3 3 2 2 2 2 Jcafe 1 1 1 1 1 1 1
Source: Company, Maybank Kim Eng
December 12, 2017 9
Jumbo Group Ltd
Fig 14: P&L forecasts FYE Sep (SGD'000) FY14 FY15 FY16 FY17 FY18E FY19E FY20E Revenue 112,404 122,795 136,752 145,103 163,673 189,418 208,192 Cost of sales (42,018) (45,520) (50,300) (53,179) (59,576) (68,813) (75,226) Gross Profit 70,386 77,275 86,452 91,924 104,096 120,605 132,967 Other income 2,533 3,059 3,071 2,573 2,300 2,300 2,300 Employee benefits expense (30,443) (34,752) (39,247) (41,765) (47,138) (54,552) (59,959) Operating lease expenses (8,846) (10,335) (11,890) (13,874) (15,549) (17,995) (19,778) Utilities expenses (3,507) (3,631) (3,457) (3,273) (3,764) (4,357) (4,788) Depreciation expense (3,127) (3,456) (3,524) (4,578) (4,829) (5,002) (5,306) Other operating expenses (11,496) (13,146) (13,342) (13,492) (13,749) (15,911) (17,488) Share of profits from associates 88 57 137 134 275 420 765 Income from operations / EBIT 15,588 15,071 18,200 17,649 21,642 25,508 28,711 Financial Income 34 101 264 174 201 202 203 Finance costs (31) (32) (26) (4) - - - Profit Before Tax 15,591 15,140 18,438 17,819 21,843 25,710 28,914 Taxation (1,813) (1,819) (2,730) (2,779) (3,451) (4,147) (4,617) Net Profit 13,778 13,321 15,708 15,040 18,392 21,562 24,298 Minority earnings (429) (570) (200) (568) (1,000) (1,600) (2,000) Profit attributable to shareholders 13,349 12,751 15,508 14,472 17,392 19,962 22,298 Adjustments - (1,000) - - - - - Core Profit 13,349 13,751 15,508 14,472 17,392 19,962 22,298
Margins (%): Gross margin 62.6 62.9 63.2 63.4 63.6 63.7 63.9 EBIT margin 13.9 12.2 13.2 12.1 13.1 13.2 13.4 PBT margin 13.9 12.3 13.5 12.3 13.3 13.6 13.9 Net margin 12.3 10.8 11.5 10.4 11.2 11.4 11.7
Expenses as a % of revenue (%): Employee benefits expense 27.1 28.3 28.7 28.8 28.8 28.8 28.8 Operating lease expenses 7.9 8.4 8.7 9.6 9.5 9.5 9.5 Utilities expenses 3.1 3.0 2.5 2.3 2.3 2.3 2.3 Depreciation expense 2.8 2.8 2.6 3.2 3.0 2.6 2.5 Other operating expenses 10.2 10.7 9.8 9.3 8.4 8.4 8.4
Source: Company, Maybank Kim Eng
December 12, 2017 10
Jumbo Group Ltd
5.3 Margins & costs
We expect gross margins to be stable, backed by operating leverage. Operating leverage should: 1) improve its bargaining power in material purchases and rentals; 2) reduce its wastage of raw materials; 3) and reduce fixed costs as a percentage of sales.
Fig 15: Operating margins
66% Gross margin (LHS) EBIT margin (RHS) 18% PBT margin (RHS) Net margin (RHS)
64% 16%
62% 14%
60% 12%
58% 10%
56% 8% FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E
Source: Company data, Maybank Kim Eng
JUMBO’s main costs are: . Raw materials & consumables. At 37% of revenue, these form the biggest chunk of its costs, presumably because seafood is behind more than 70% of its revenue. Such costs have been declining in the last few years, from 39% in FY13 to 37% in FY17. This was in part thanks to JUMBO’s ability to charge higher prices for its food as its brand value improved with more outlets and better execution. As JUMBO becomes an ever bigger buyer of seafood, we believe it should be able to attract better pricing from its suppliers. An expanded central kitchen should also help it optimise raw-material usage. . Staff costs. At 27-29% of its revenue, these are its second-biggest chunk of costs. JUMBO has consistently spent less on staffing than the industry, except BreadTalk. We attribute this to its lean staffing and savvy use of IT at the front of the house to maximise table turnover. Stable staff turnover is another positive, keeping staff costs in check. About 100 of its 700+ employees have been with JUMBO for more than 10 years. We believe its ERP system will further enhance efficiency, through real-time decisions on the deployment of temporary workers, in response to nightly takings. . Rentals. At 9% of revenue, rentals may creep higher. JUMBO generally signs 3-year leases. But as it expands, its rental expenses have been increasing every year. Its biggest Singapore outlet at the East Coast Seafood Centre is likely leased from the National Parks Board at competitive rates, since it has been there for more than 20 years. Still, we would watch for any changes in leasing conditions by National Parks that may affect JUMBO. In China, JUMBO has been able to secure competitive rates as it was invited by the landlords of the malls it operates in. . Other operating expenses. At 9-11% of revenue, these have been steadily declining as a percentage of revenue due to better operating leverage as JUMBO scales up. Other operating expenses include utilities, cleaning costs, credit-card costs, marketing & advertising, repairs & maintenance, etc.
December 12, 2017 11
Jumbo Group Ltd
5.3 Capex not an issue; ample FCF
Past capex for outlet expansion was low, thanks to its established presence in two markets which provide operating leverage and the experience for setting up new outlets. Capex should remain low relative to cash flows. Even in FY14 when it opened its first Jumbo outlet in China at IAPM Mall, its third JPOT outlet and its first J Café in Singapore, capex was less than SGD4m. Its IAPM Mall outlet is its second-largest at 12,239 sf, after Jumbo East Coast’s 20,484 sf. As such, we do not expect capex for new outlets to cost more than SGD2.5m each. Capex per outlet in FY14-15 averaged SGD2.2m. Capex in FY16 accelerated to SGD8m due to one new outlet, expansion of existing outlets and the acquisition of new equipment for its central kitchens.
Come FY19E, capex is expected to bulge to SGD23m, as we have assumed the acquisition of new premises to put its Singapore central kitchen and other functions in one location. Even then, we believe its strong FCF generation should stand JUMBO in good stead. Other than the above, we do not expect bulky capex, as a central kitchen in Shanghai would not be needed until it has at least 6-7 outlets up and running. This is not expected till FY20.
Fig 16: Capex schedule assumed FYE Sep (SGD’000) FY14 FY15 FY16 FY17 FY18E FY19E FY20E Additional no. of outlets which require capex, 1 1 1 3 2.5 2.5 2.0 assuming 2 Taiwan outlets require the capex of one full outlet and no capex for franchise outlets Capex per outlet 2,500 2,550 2,601 Total capex for new outlets 6,250 6,375 5,202 Acquisition of premises for central kitchen 15,000 Others 2,000 3,000 3,000 Total capex 3,559 5,469 7,893 5,884 8,250 24,375 8,202
Source: Company data, Maybank Kim Eng
JUMBO generates good FCF because: . Of its cash business. Customers pay by cash or credit cards and Jumbo is paid by their banks and card issuers within three days. JUMBO gives no credit terms except to corporate customers such as travel agencies. These account for less than 1% of its revenue. . Nothing is kept in stock. Inventory is very low due to the perishable nature of its food ingredients. Meat, seafood and vegetables are purchased every day from wholesalers. . Suppliers finance its business. Suppliers give JUMBO 30 days of credit. Essentially, its business is being financed by its suppliers.
Fig 17: Cashflow analysis FYE Sep (SGD’000) FY14 FY15 FY16 FY17 FY18E FY19E FY20E CF from operations 16,330 15,118 19,900 11,599 26,343 26,571 29,079 Capex (3,559) (5,469) (7,893) (5,884) (8,250) (24,375) (8,202) FCF 12,772 9,649 12,007 5,715 18,093 2,196 20,877 Dividend payout 10,903 10,903 12,175 13,973 15,608 Payout ratio 70% 75% 70% 70% 70%
Receivable days 17 20 16 19 19 18 18 Inventory days 11 8 8 9 9 9 10 Payable days 120 114 103 69 70 74 76 Cash collection cycle (92) (86) (78) (56) (41) (47) (48)
Net cash 46,332 59,292 58,665 51,262 57,455 46,098 52,132
Source: Company, Maybank Kim Eng
December 12, 2017 12
Jumbo Group Ltd
5.4 Balancing dividends & capex
Although JUMBO has no formal dividend policy, it originally intended to pay out 30% of its annual earnings in FY16-17. It ended up paying 70-75%: 40-45% ordinary and 30% special. From FY18E onwards, we have assumed 50%, premised on its robust FCF and ample net cash balance of SGD51m as at end-FY17. We estimate that it will have sufficient FCF to fund its dividends, excluding a potential SGD15m capex in FY19E for its acquisition of new premises for its central kitchen.
Fig 18: Cashflow forecasts FYE Sep (SGD'000) FY14 FY15 FY16 FY17 FY18E FY19E FY20E Profit before tax 15,591 15,140 18,438 17,819 21,843 25,710 28,914 Depreciation 3,127 3,456 3,524 4,578 4,829 5,002 5,306 Other non-cash adjustments (391) (349) (563) (113) (411) (622) (968) Operating profit before working cap chg 18,327 18,247 21,399 22,284 26,262 30,090 33,252 - - - - Changes in working capital: (7,837) 3,331 427 240 (Increase)/decrease in receivables (736) (1,255) 576 (3,011) 516 (1,340) (977) (Increase)/ decrease in inventories (679) 182 (61) (384) (158) (257) (188) Increase/ (decrease) in payables 186 335 (659) (4,442) 2,973 2,025 1,405 Other assets ------Cash generated from operations 17,098 17,509 21,255 14,447 29,593 30,517 33,493 Interest income 34 101 264 174 201 202 203 Finance costs (31) (32) (26) (4) - - - Income Tax Paid (770) (2,460) (1,593) (3,018) (3,451) (4,147) (4,617) Net cash from operating activities 16,330 15,118 19,900 11,599 26,343 26,571 29,079
Acquisition of PPE (3,559) (5,469) (7,893) (5,884) (8,250) (24,375) (8,202) Proceeds from disposal of PPE 27 15 188 - - - - Proceeds from disposal of ST investment (1,002) 3,360 - - - - - Div income from an associate 80 - 136 - 275 420 765 Div income from ST investment 115 104 7 14 - - - Others (318) ------Net cash used in investing activities (4,657) (1,990) (7,562) (5,870) (7,975) (23,955) (7,437)
Additional capital from NCI - 570 - 1,000 - - - Dividends paid to owners (1,300) (1,000) (50,844) (14,110) (12,175) (13,973) (15,608) Dividends paid to MI (166) - (898) - - - - Withdrawal of structured FD - 200 - - - - - Repayment of bank borrowing (91) (95) (97) (599) - - - Finance leases (130) (180) (135) - - - - Proceeds from issuance of shares - - 38,839 - - - - Net cash used in financing activities (1,687) (505) (13,135) (13,709) (12,175) (13,973) (15,608)
Net increase/(decrease) in cash 9,987 12,623 (797) (7,980) 6,193 (11,357) 6,034 Cash at beginning 37,435 47,438 60,061 59,264 51,262 57,455 46,098 Net Effect of FX Changes 16 - - (22) - - - End balance ------Cash at end 47,438 60,061 59,264 51,262 57,455 46,098 52,132
Source: Company data, Maybank Kim Eng
December 12, 2017 13
Jumbo Group Ltd
5.5 Healthy balance sheet
JUMBO had healthy net cash, with very little debt, even before its IPO in FY14. In FY17, it fully paid off its debt and funded its expansion with internally generated cash.
Fig 19: Balance-sheet forecasts FYE Sep (SGD'000) FY14 FY15 FY16 FY17 FY18E FY19E FY20E Current assets 57,591 68,025 66,716 62,203 68,038 58,278 65,477 Cash & cash equivalent 47,438 60,061 59,264 51,262 57,455 46,098 52,132 Trade & other receivables 5,346 6,601 6,025 9,036 8,520 9,860 10,837 Short-term investments 3,391 329 332 426 426 426 426 Other assets 200 0 0 0 0 0 0 Inventories 1,216 1,034 1,095 1,479 1,637 1,894 2,082
Non-current assets 13,419 15,491 19,522 21,027 24,383 43,755 46,652 Investment in associates 358 415 416 550 550 550 550 Avail-for-sale investment 75 75 75 75 75 75 75 Goodwill 782 782 782 782 782 782 782 Property, plant and equipment 11,966 13,981 18,011 19,382 22,738 42,110 45,007 Others 238 238 238 238 238 238 238
Total assets 71,010 83,516 86,238 83,230 92,421 102,034 112,128
Current liabilities 18,024 17,577 18,917 14,449 17,422 19,446 20,852 Trade and other payables 13,831 14,166 14,527 10,085 13,058 15,082 16,488 Bank Borrowings 230 182 87 0 0 0 0 Other liabilities 1,569 1,477 1,618 1,829 1,829 1,829 1,829 Income tax payable 2,393 1,752 2,685 2,535 2,535 2,535 2,535
Non-current liabilities 969 742 813 301 301 301 301 Bank Borrowings 875 587 512 0 0 0 0 Deferred tax liabilities 93 93 301 301 301 301 301 Other liabilities 0 62 0 0 0 0 0
Total liabilities 18,992 18,319 19,730 14,750 17,723 19,747 21,153
Net assets (or total equity) 52,018 65,197 66,508 68,480 74,698 82,286 90,976
Shareholders' equity 52,018 65,197 66,508 68,480 74,698 82,286 90,976 Share capital 2,596 2,596 48,441 48,550 48,550 48,550 48,550 Other reserve 117 332 (2,937) (2,938) (2,938) (2,938) (2,938) Retained Earnings 44,396 53,995 19,277 19,639 24,857 30,845 37,535
Equity attributable to owners 47,109 56,923 64,781 65,251 70,469 76,457 83,147 Non-controlling interest 4,909 8,274 1,727 3,229 4,229 5,829 7,829
Source: Company data, Maybank Kim Eng
December 12, 2017 14
Jumbo Group Ltd
6 Valuation & TP
Undervalued to regional peers despite superior ROEs & margins JUMBO trades at 21x FY18E P/E and 19x for FY19E. These represent discounts to domestic peers’ 24x and 26x averages. However, we believe local peers are not good comparables due to Singapore’s small market. We think regional peers provide better comparisons, as JUMBO is expanding regionally. They include Café de Coral (341 HK; NOT RATED) and China Quanjude (002816 CN; NOT RATED). They trade at 26x and 23x on average. Despite range-topping ROEs and margins, JUMBO trades at discounts to these regional peers.
Deserves re-rating We value JUMBO using DCF, at SGD0.70. We believe our DCF valuation (WACC 9%) captures the full value of its expansion that could take more than one year. It implies 26x FY18E, 23x FY19E and 20x FY20E P/Es, in line with its regional peers. We believe our valuation is conservative, as we have assumed 1x beta vs Bloomberg’s 2-year beta of 0.6x to account for execution risks in its aggressive overseas expansion.
Fig 20: Peer comparisons EV/ Div Net Share Target Market P/E 3Y EPS PEG EBITDA P/BV ROE yield margin Rating Curr. price price cap (x) CAGR (x) (x) (x) (%) (%) (%) (lccy) (lccy) (USD m) Hist FY1 FY2 FY3 (%) FY1 FY1 FY1 FY2 FY1 Hist Singapore F&B groups Jumbo Group BUY SGD 0.58 0.70 273 26 21 19 17 15 1.3 12 5.2 26 27 3.3 10.6 Breadtalk Group NR SGD 1.56 n/a 325 21 29 21 19 44 0.5 6 2.9 17 14 2.6 3.5 Kimly NR SGD 0.38 n/a 321 19 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 11.2 ABR Holdings NR SGD 0.79 n/a 117 32 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 4.5 No Signboard NR SGD 0.25 n/a 86 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a Neo Group NR SGD 0.71 n/a 77 47 24 24 18 21 1.1 n/a 2.6 n/a n/a n/a 0.9 RE&S Holdings NR SGD 0.25 n/a 64 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 4.0 Japan Foods NR SGD 0.44 n/a 56 17 19 17 16 0 n/a 5 n/a 14 15 5.1 6.7 Tung Lok Restaur NR SGD 0.22 n/a 45 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a -0.9 Katrina Group NR SGD 0.19 n/a 32 17 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 4.2 Sakae Holdings NR SGD 0.31 n/a 32 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a -10.0 Soup Restaurant NR SGD 0.15 n/a 30 29 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 3.5 Average excluding Jumbo 26 24 21 18 22 0.8 6 2.8 16 15 3.9 2.6
Regional F&B groups Minor Int’l Hold THB 42.25 45.00 5,985 37 30 25 26 17 1.5 19 3.8 15 16 1.2 9.5 MK Restaurant NR THB 81.00 n/a 2,288 31 30 27 24 14 2.0 17 5.3 18 19 3.4 15.4 Gourmet Master NR TWD 400.00 n/a 2,172 31 30 26 21 21 1.2 15 5.8 23 23 1.7 9.2 Café De Coral NR HKD 21.10 n/a 1,583 26 25 22 21 4 5.3 12 3.6 15 16 3.9 5.9 China Quanjude NR CNY 18.04 n/a 842 39 37 34 31 9 3.9 n/a n/a 10 10 1.1 7.9 Oishi Group NR THB 135.00 n/a 776 17 22 20 20 (4) (4.7) 14 n/a 20 20 2.3 10.7 Ajisen (China) Hold CNY 3.61 3.28 505 32 22 21 15 27 0.8 6 1.1 6 6 4.4 4.8 Oldtown BUY MYR 2.88 3.18 327 20 19 18 15 14 1.3 11 2.9 18 18 3.1 14.8 Tsui Wah NR HKD 1.13 n/a 204 17 14 13 10 20 0.6 6 1.1 9 9 6.2 5.3 Berjaya Food Buy MYR 1.70 2.00 157 54 26 22 17 48 0.5 9 1.5 6 7 2.4 1.9 Average 30 26 23 20 17 1.2 12 3.1 14 14 3.0 8.5
Total average 28 25 22 19 19 1.0 9 2.9 15 14 3.4 5.6 Numbers are from consensus for not rated stocks. Source: Bloomberg, Maybank Kim Eng. Share prices as of 11 Dec 2017
December 12, 2017 15
Jumbo Group Ltd
Fig 21: DCF-based TP of SGD0.70 (SGD ‘000) FY16 FY17 FY18E FY19E FY20E FY21E FY22E FY23E FY24E FY25E FY26E FY27E FY28E EBIT 18,200 17,649 21,642 25,508 28,711 31,145 33,068 35,753 38,363 40,695 42,838 44,763 46,606 Add: depreciation 3,524 4,578 4,829 5,002 5,306 5,401 5,757 6,090 6,072 6,071 6,085 6,111 6,150 Add: other non-cash items (188) 191 65 ------Add: associate results (137) (134) (275) (420) (765) (1,173) (1,647) (1,935) (2,233) (2,275) (2,318) (2,361) (2,406) Working capital changes (144) (7,837) 3,331 427 240 (430) 98 107 101 115 115 116 133 Income taxes paid (1,593) (3,018) (3,451) (4,147) (4,617) (5,009) (5,313) (5,784) (6,250) (6,721) (7,168) (7,585) (7,994) Net cash from op 19,662 11,429 26,142 26,369 28,876 29,934 31,962 34,231 36,054 37,885 39,552 41,045 42,489 Net capex (7,893) (5,884) (8,250) (24,375) (8,202) (8,366) (8,533) (5,944) (6,063) (6,184) (6,308) (6,434) (6,562) FCFE 11,769 5,545 17,892 1,994 20,674 21,568 23,429 28,287 29,991 31,701 33,244 34,611 35,927 Terminal Value 523,503
PV 17,892 1,830 17,401 16,654 16,598 18,385 17,883 17,342 16,684 15,936 236,309
Total discounted FCFE 392,913
Add: FY18E net cash 57,455
Intrinsic value 450,368
Value/ Share 0.70
WACC 9.0%
Cost of equity 9.0%
Cost of debt 4.0%
Optimum Debt/Capital 0.0% No debt and FCF generation should sustain JUMBO’s net-cash position. ratio Risk-free rate 2.5%
Beta 1.00 Bloomberg’s beta is 0.6 but we use 1.0 to factor in potential expansion execution risks. Market return 9.0%
Terminal growth 2.0%
Current price 0.58
Upside 22%
Current mkt cap 368,853
Current P/E (FY18E) 21.2
Implied mkt cap of TP 450,368
Implied P/E of TP 29.0 31.1 25.9 22.6 20.2
Source: Company data, Maybank Kim Eng
December 12, 2017 16
Jumbo Group Ltd
Fig 22: Singapore & regional F&B players Domestic Overseas Company Food retail brands revenue revenue Singapore-listed F&B groups Jumbo Group 82% 18% JUMBO, Ng Ah Sio Bak Kut Teh, JPOT, Singapore Seafood Republic Breadtalk Group 55% 45% Diversified - BreakTalk, Food Republic, Toast Box, RamenPlay, Din Tai Fung, The Icing Room, Carl's Jr, Bread Society, Thye Moh Chan Kimly 100% 0% Kimly Coffee Shop, food clique, food retail (mixed vegetables, Rice Garden, Teochew porridge, dim sum, seafood zi char) ABR Holdings 86% 14% Mainly Western - Swensen's, Gloria Jean's Coffees, Hippopotamus Restaurant Grill, Yogen Fruz, Oishi Japanese Pizza No Signboard 100% 0% No Signboard Seafood brand, with four outlets in Singapore, three are wholly-owned and one is under franchise. Also runs beer business with Draft Denmark brand. Neo Group 91% 9% Mainly Japanese - umisushi, issho izakaya, NANAMI UDON, LJJ Café RE&S Holdings 91% 9% Japanese brands – Kuriya dining, Ichiban Boshi, Ichiban Sushi, Shimbashi Soba, Kabe na Ana, Shabu Tontei, Kuishin Bo, Sumiya, Ami Ami, YakiyakiBo, Shabu Ichi, MEN-ICHI, Kuriya Japanese Market, Ichiban Bento, Idaten Udon, Wadori Yakitori, Tokyo eater, Ginzushi, TenFuku, Gokoku. Japan Foods 100% 0% Ramen specialist - Ajisen Ramen, Kazokutei, Botejyu, Fruit Paradise, Yonehachi, Menya Musashi, Osaka Ohsho, Menzo Butao, Kura, Keika, Hanamidori Tung Lok Restaurants 97% 3% Tung Lok Seafood, Tung Lok Signatures, Singapore Seafood Republic (partners with Jumbo), Lao Beijing, Dancing Crab, Tong Le Private Dining, Ruyi, Shin Yeh, TungLok Teahouse, Lokkee, etc Katrina Group 97% 3% Bali Thai, Bayang, Hunguo, Hutong, Indobox, Muchos, RENNthai, So Pho, Streats Sakae Holdings 61% 39% Mainly Japanese belt sushi - Sakae, Senjyu, Sachi, Kyo, Hei Sushi, Crepes & Cream Soup Restaurant 100% 0% Sansui ginger chicken specialist under SOUP restaurants, also owns Pot Luck Heboh Zi Char and Café O
Regional F&B groups Listed in Description Minor International Thailand Hotels and restaurants in Thailand, including investee brands such as The Pizza Company, The Coffee Club, Thai Express, BreadTalk, etc MK Restaurant Thailand Restaurant chain - MK Restaurants, MK Gold Restaurants, Yayoi Restaurant, Hakata Ramen, Miyazaki Teppanyaki, Na Siam Thai Restaurant, Le Siam Thai and Le Petit Gourmet Master Taiwan Café chain under 85°C Café brand in Taiwan, China, US, Australia and HK Cafe de Coral Hong Kong Café de Coral quick service restaurants, Oliver's Super Sandwiches, The Spaghetti House, 360 Series, PizzaStage in HK China Quanjude China Quanjude Peking Roast Duck specialty restaurant chain in China Oishi Group Thailand 9 Japanese restaurant brands under Oishi name Ajisen (China) Hong Kong Ajisen fast casual restaurant chain in HK and China Oldtown Malaysia Old Town café chain in Malaysia, with own coffee manufacturing Tsui Wah Holdings Hong Kong Tsui Wah Restaurant chain in HK and China Berjaya Food Malaysia Kenny Rogers Roasters, StarBucks, Jollibean in Malaysia
Source: Company data, Maybank Kim Eng
December 12, 2017 17
Jumbo Group Ltd
7 Risks
Slowdown in Singapore’s tourism JUMBO’s seafood outlets are popular with tourists. Weaker tourist arrivals and extreme hot weather could affect its restaurant takings. During the worst of Singapore’s haze conditions in 2013, takings at its Dempsey Hill outlet were down by as much as 40%, according to press reports. But on balance, we do not see this as a deal-breaker for JUMBO. This is borne out by our observation that its outlets are packed on most nights, although they are found outside shopping malls. At least two are out of the way at the East Coast Seafood Centre and Dempsey Hill.
Fig 23: Tourist arrivals in Singapore have recovered since Fig 24: … followed by spending by tourists 2016… (SGD b) Tourism receipts (LHS) % YoY growth (RHS)(% YoY) (mil) Visitor arrivals (LHS) % YoY growth (RHS) (% YoY) 30 13.0 15 18 16.4 25 20.2 15.6 15.1 15.2 24.6 16 25 23.1 23.5 23.6 20 22.3 21.8 10 14 +4% 11.7 15 12 11.3 20 10.1 3.6 13.1 +10% 5 10 7.4 7.7 10 1.7 15 0.4 12.7 8 5 11.6 6 0 0.9 0 10 4 (1.6) (3.0) (5) (5) 2 (4.3) 5 0 (10) (7.6) 0 (10) 2011 2012 2013 2014 2015 2016 6M16 6M17
Source: SingStat, Singapore Tourism Board Source: SingStat, Singapore Tourism Board
Reputational risk JUMBO sources ingredients such as meat, non-crab seafood, crabs and vegetables locally for its China restaurants. Management has to ensure the same food quality as for its Singapore restaurants. If it fails, it risks tarnishing its brand in an important market. In recent years, China’s food supplies have come under scrutiny, ranging from a melamine-laced infant-milk scandal in 2008 to a gutter- oil scandal in 2010.
Crab shortages Chilli crab is traditionally cooked using mud or mangrove crabs readily found in Africa, Australia and many parts of Asia. Those from Sri Lanka are highly prized for their larger size and sweeter meat. We believe there is no risk of shortages. Mud crabs are not an endangered species and are prolific breeders within their short lifespan of 3-4 years. JUMBO buys its crabs from Singapore wholesalers which import from diversified sources. We understand that Singapore’s seafood wholesalers import their crabs from three sources, depending on crab size: Sri Lanka (large crabs – 1.4-1.6kg), Indonesia (medium – 0.8-1.1kg) and Vietnam (small – 0.4-0.6kg).
Possible earnings volatility during gestation of new outlets While we expect JUMBO’s China outlets to break even within their first year of operations, given their attractive locations and the success of JUMBO’s recent new outlets, quarterly earnings could be volatile before its new outlets are established enough to cover their initial operating costs.
December 12, 2017 18
Jumbo Group Ltd
Price Drivers Value Proposition
. Restaurant operator popular in Singapore and China, given Historical share price trend 3 reasonable prices and consistent taste. 0.800 280 4 . Iconic dishes, outlets in ideal locations, strong brands and 0.750 2 260 0.700 5 240 effective front-and-back-end operations provide high, 0.650 220 defensible net margins. 0.600 200 1 0.550 180 Branding hinges on signature seafood such as chilli crab. . 0.500 160 Helps it stand out in crowded markets, especially when 0.450 140 expanding overseas. 0.400 120 0.350 100 . Low-cash-cost business financed by suppliers’ credit. High 0.300 80 FCF generation supports expansion plus dividends. Nov-15 Mar-16 Jul-16 Nov-16 Mar-17 Jul-17 Nov-17 Jumbo Group Ltd - (LHS, SGD) . FY17 ROIC of 21% vs WACC of 9%. Jumbo Group Ltd / MSCI AC Asia ex JP - (RHS, %)
How Jumbo stacks up in profitability & returns Source: Company, Maybank Kim Eng 1. Stock consolidated after surging from SGD0.25 IPO price as market awaited further developments of newly- opened China stores. 2. Stock broke out of consolidation following 1Q16 results which highlighted the promising performance of its premium IFC Mall outlet in Shanghai. 3. Stock peaked in 2Q16 and retreated ahead of expected seasonal weakness in 3Q16. 4. Continued to retreat as growth flattened out on lack of new outlets. 5. Stock surged after the announcement of expansion to Source: Bloomberg, Maybank Kim Eng Taiwan but consolidated after a lacklustre 4Q17.
Financial Metrics Swing Factors
. More new Jumbo seafood outlets overseas to power top Upside and bottom lines. We assume 4-5 new outlets pa for FY18- 20E, including new Ng Ah Sio Bak Kut Teh outlets. . Better-than-expected Singapore and China sales, . Jumbo seafood should continue to anchor revenue and especially from new outlets. earnings. . Lower-than-expected food and staff costs that could lead . Strong FCF comes from cash business, with little inventory to better-than-expected margins. requirements and low capex for new outlets. . Expectations of higher dividends or articulation of a . Dividend payouts of 70-75% in FY16-17 exceeded earlier dividend policy. guidance of at least 30%. We expect 70% or so, backed by . Expansion success, especially in overseas markets such as robust FCF. China, Taiwan and Vietnam.
No. of Jumbo Seafood outlets and potential earnings growth Singapore outlets China outlets Downside (No.) (SGD m) Taiwan outlets Franchise outlets 25 25 Core earnings (RHS) 22.3 20.0 22 . Any changes in China’s food-safety laws that could affect 20 17.4 4 20 China’s imports of mud crabs. 18 15.5 14.5 3 . Shortage of critical ingredients for its signature dishes: 13.3 13.8 4 15 14 15 2 crabs, other seafood. 2 10 1 . Epidemics or health scares that can damage its 10 8 10 8 1 7 6 reputation eg mass food poisoning, salmonella. 4 2 3 5 1 5 . Poor execution of expansion, including major delays in 5 5 5 5 5 6 6 opening of and longer-than-expected breakeven for new 0 0 outlets. FY14 FY15 FY16 FY17 FY18E FY19E FY20E Source: Company data, Maybank Kim Eng
December 12, 2017 19
Jumbo Group Ltd
FYE 30 Sep FY16A FY17A FY18E FY19E FY20E Key Metrics P/E (reported) (x) 20.8 28.5 21.2 18.5 16.5 Core P/E (x) 23.8 25.5 21.2 18.5 16.5 P/BV (x) 5.7 5.7 5.2 4.8 4.4 P/NTA (x) 5.8 5.7 5.3 4.9 4.5 Net dividend yield (%) 3.0 3.0 3.3 3.8 4.2 FCF yield (%) 3.3 1.6 5.0 0.7 5.9 EV/EBITDA (x) 15.0 14.5 12.0 10.9 9.8 EV/EBIT (x) 18.0 18.3 14.8 13.1 11.6
INCOME STATEMENT (SGD m) Revenue 136.8 145.1 163.7 189.4 208.2 Gross profit 86.5 91.9 104.1 120.6 133.0 EBITDA 21.6 22.1 26.2 30.1 33.3 Depreciation (3.5) (4.6) (4.8) (5.0) (5.3) Amortisation 0.0 0.0 0.0 0.0 0.0 EBIT 18.1 17.5 21.4 25.1 27.9 Net interest income /(exp) 0.2 0.2 0.2 0.2 0.2 Associates & JV 0.1 0.1 0.3 0.4 0.8 Exceptionals 0.0 0.0 0.0 0.0 0.0 Other pretax income 0.0 0.0 0.0 0.0 0.0 Pretax profit 18.4 17.8 21.8 25.7 28.9 Income tax (2.7) (2.8) (3.5) (4.1) (4.6) Minorities (0.2) (0.6) (1.0) (1.6) (2.0) Perpetual securities 0.0 0.0 0.0 0.0 0.0 Discontinued operations 0.0 0.0 0.0 0.0 0.0 Reported net profit 15.5 14.5 17.4 20.0 22.3 Core net profit 15.5 14.5 17.4 20.0 22.3 Preferred Dividends 0.0 0.0 0.0 0.0 0.0
BALANCE SHEET (SGD m) Cash & Short Term Investments 59.3 51.3 57.5 46.1 52.1 Accounts receivable 6.0 9.0 8.5 9.9 10.8 Inventory 1.1 1.5 1.6 1.9 2.1 Reinsurance assets 0.0 0.0 0.0 0.0 0.0 Property, Plant & Equip (net) 18.0 19.4 22.7 42.1 45.0 Intangible assets 0.8 0.8 0.8 0.8 0.8 Investment in Associates & JVs 0.0 0.0 0.0 0.0 0.0 Other assets 1.1 1.3 1.3 1.3 1.3 Total assets 86.2 83.2 92.4 102.0 112.1 ST interest bearing debt 0.1 0.0 0.0 0.0 0.0 Accounts payable 14.5 10.1 13.1 15.1 16.5 Insurance contract liabilities 0.0 0.0 0.0 0.0 0.0 LT interest bearing debt 0.5 0.0 0.0 0.0 0.0 Other liabilities 5.0 5.0 5.0 5.0 5.0 Total Liabilities 19.7 14.8 17.7 19.7 21.2 Shareholders Equity 64.8 65.3 70.5 76.5 83.1 Minority Interest 1.7 3.2 4.2 5.8 7.8 Total shareholder equity 66.5 68.5 74.7 82.3 91.0 Perpetual securities 0.0 0.0 0.0 0.0 0.0 Total liabilities and equity 86.2 83.2 92.4 102.0 112.1
CASH FLOW (SGD m) Pretax profit 18.4 17.8 21.8 25.7 28.9 Depreciation & amortisation 3.5 4.6 4.8 5.0 5.3 Adj net interest (income)/exp (0.2) (0.2) (0.2) (0.2) (0.2) Change in working capital (0.1) (7.8) 3.3 0.4 0.2 Cash taxes paid (1.6) (3.0) (3.5) (4.1) (4.6) Other operating cash flow (0.3) 0.1 (0.2) (0.4) (0.8) Cash flow from operations 19.9 11.6 26.3 26.6 29.1 Capex (7.9) (5.9) (8.3) (24.4) (8.2) Free cash flow 12.3 5.7 18.4 2.6 21.6 Dividends paid (50.8) (14.1) (12.2) (14.0) (15.6) Equity raised / (purchased) 38.8 0.0 0.0 0.0 0.0 Perpetual securities 0.0 0.0 0.0 0.0 0.0 Change in Debt (0.1) (0.6) 0.0 0.0 0.0 Perpetual securities distribution 0.0 0.0 0.0 0.0 0.0 Other invest/financing cash flow (8.6) (4.9) (8.0) (24.0) (7.4) Effect of exch rate changes 0.0 (0.0) 0.0 0.0 0.0 Net cash flow (0.8) (8.0) 6.2 (11.4) 6.0
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FYE 30 Sep FY16A FY17A FY18E FY19E FY20E Key Ratios Growth ratios (%) Revenue growth 11.4 6.1 12.8 15.7 9.9 EBITDA growth 16.9 2.3 18.6 14.9 10.5 EBIT growth 20.3 (3.0) 22.0 17.4 11.4 Pretax growth 21.8 (3.4) 22.6 17.7 12.5 Reported net profit growth 21.6 (6.7) 20.2 14.8 11.7 Core net profit growth 32.0 (6.7) 20.2 14.8 11.7
Profitability ratios (%) EBITDA margin 15.8 15.2 16.0 15.9 16.0 EBIT margin 13.2 12.1 13.1 13.2 13.4 Pretax profit margin 13.5 12.3 13.3 13.6 13.9 Payout ratio 70.3 75.3 70.0 70.0 70.0
DuPont analysis Net profit margin (%) 11.3 10.0 10.6 10.5 10.7 Revenue/Assets (x) 1.6 1.7 1.8 1.9 1.9 Assets/Equity (x) 1.3 1.3 1.3 1.3 1.3 ROAE (%) 25.5 22.3 25.6 27.2 27.9 ROAA (%) 18.3 17.1 19.8 20.5 20.8
Liquidity & Efficiency Cash conversion cycle (78.4) (55.9) (41.2) (46.9) (48.1) Days receivable outstanding 16.6 18.7 19.3 17.5 17.9 Days inventory outstanding 7.6 8.7 9.4 9.2 9.5 Days payables outstanding 102.7 83.3 69.9 73.6 75.5 Dividend cover (x) 1.4 1.3 1.4 1.4 1.4 Current ratio (x) 3.5 4.3 3.9 3.0 3.1
Leverage & Expense Analysis Asset/Liability (x) 4.4 5.6 5.2 5.2 5.3 Net gearing (%) (incl perps) net cash net cash net cash net cash net cash Net gearing (%) (excl. perps) net cash net cash net cash net cash net cash Net interest cover (x) na na na na na Debt/EBITDA (x) 0.0 0.0 0.0 0.0 0.0 Capex/revenue (%) 5.8 4.1 5.0 12.9 3.9 Net debt/ (net cash) (58.7) (51.3) (57.5) (46.1) (52.1) Source: Company; Maybank
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Research Offices
REGIONAL MALAYSIA HONG KONG / CHINA THAILAND
Sadiq CURRIMBHOY WONG Chew Hann, CA Head of Research Christopher WONG Maria LAPIZ Head of Institutional Research Regional Head, Research & Economics (603) 2297 8686 [email protected] (852) 2268 0652 Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 (65) 6231 5836 • Strategy [email protected] [email protected] [email protected] • HK & China Properties • Strategy • Consumer • Materials • Ind. Estates Desmond CH’NG, ACA • Oil & Gas • Telcos Jacqueline KO, CFA WONG Chew Hann, CA (603) 2297 8680 Sittichai DUANGRATTANACHAYA (852) 2268 0633 [email protected] Regional Head of Institutional Research [email protected] (66) 2658 6300 ext 1393 • Consumer Staples & Durables (603) 2297 8686 • Banking & Finance [email protected] [email protected] • Services Sector • Transport • Property • Telcos LIAW Thong Jung Ka Leong LO, CFA (852) 2268 0630 [email protected] Tanawat RUENBANTERNG ONG Seng Yeow (603) 2297 8688 [email protected] • Oil & Gas Services- Regional • Consumer Discretionary & Auto (66) 2658 6300 ext 1394 Regional Head of Retail Research [email protected] Mitchell KIM (65) 6231 5839 ONG Chee Ting, CA • Banks & Diversified Financials (852) 2268 0634 [email protected] [email protected] (603) 2297 8678 [email protected] • Internet & Telcos Ornmongkol TANTITANATORN • Plantations - Regional (66) 2658 6300 ext 1395 TAN Sin Mui Ning MA, CFA [email protected] Director of Research Mohshin AZIZ (852) 2268 0672 [email protected] • Oil & Gas (65) 6231 5849 (603) 2297 8692 [email protected] • Insurance Sukit UDOMSIRIKUL Head of Retail Research [email protected] • Aviation - Regional • Petrochem (66) 2658 5000 ext 5090 Ricky NG, CFA [email protected] ECONOMICS YIN Shao Yang, CPA (852) 2268 0689 [email protected] (603) 2297 8916 [email protected] • Regional Renewables Ekachai TARAPORNTIP Deputy Head Suhaimi ILIAS • Gaming – Regional • Media • HK & China Properties 66) 2658 5000 ext 1530 Chief Economist [email protected] Malaysia | Philippines | China TAN Chi Wei, CFA Sonija LI, CFA, FRM Surachai PRAMUALCHAROENKIT (603) 2297 8682 (603) 2297 8690 [email protected] (852) 2268 0641 [email protected] (66) 2658 5000 ext 1470 [email protected] • Power • Telcos • Gaming [email protected] • Auto • Conmat • Contractor • Steel CHUA Hak Bin WONG Wei Sum, CFA Stefan CHANG, CFA Regional Thematic Macroeconomist (603) 2297 8679 [email protected] (852) 2268 0675 [email protected] Suttatip PEERASUB (66) 2658 5000 ext 1430 (65) 6231 5830 • Property • Technology – Regional [email protected] [email protected] LEE Yen Ling Bonny WENG • Media • Commerce LEE Ju Ye (603) 2297 8691 [email protected] (852) 2268 0644 [email protected] Sutthichai KUMWORACHAI Singapore • Building Materials • Glove • Ports • Shipping • Technology – Regional (66) 2658 5000 ext 1400 (65) 6231 5844 [email protected] [email protected] Ivan YAP Tony REN, CFA • Energy • Petrochem (603) 2297 8612 [email protected] (852) 2268 0640 [email protected] • Healthcare & Pharmaceutical Termporn TANTIVIVAT Dr Zamros DZULKAFLI • Automotive • Semiconductor • Technology (66) 2658 5000 ext 1520 (603) 2082 6818 INDIA [email protected] [email protected] Kevin WONG • Property (603) 2082 6824 [email protected] Jigar SHAH Head of Research Ramesh LANKANATHAN • REITs • Consumer Discretionary Jaroonpan WATTANAWONG (91) 22 6623 2632 [email protected] (603) 2297 8685 (66) 2658 5000 ext 1404 [email protected] LIEW Wei Han • Strategy • Oil & Gas • Automobile • Cement [email protected] • Transportation • Small cap (603) 2297 8676 [email protected] Vishal MODI FX • Consumer Staples Poonpat CHAIKUMHAN, CFA (91) 22 6623 2607 [email protected] (66) 2658 5000 ext 1511 Saktiandi SUPAAT Adrian WONG • Banking & Financials [email protected] Head, FX Research (603) 2297 8675 [email protected] • Electronics • ICT (65) 6320 1379 Neerav DALAL • Constructions • Healthcare Sorrabhol VIRAMETEEKUL [email protected] (91) 22 6623 2606 [email protected] Head of Digital Research Jade TAM • Software Technology • Telcos Christopher WONG (66) 2658 5000 ext 1550 (603) 2297 8687 [email protected] (65) 6320 1347 [email protected] Vishal PERIWAL • Food, Transportation [email protected] • Media • Building Materials (91) 22 6623 2605 vishalperiwa@maybank- Wijit ARAYAPISIT Leslie TANG Mohd Hafiz Hassan ke.co.in (66) 2658 5000 ext 1450 (603) 2082 6819 [email protected] (65) 6320 1378 • Infrastructure [email protected] • Small & Mid Caps [email protected] • Strategist INDONESIA TEE Sze Chiah Head of Retail Research Fiona LIM VIETNAM (65) 6320 1374 (603) 2082 6858 [email protected] Isnaputra ISKANDAR Head of Research [email protected] (62) 21 8066 8680 LE Hong Lien, ACCA Nik Ihsan Raja Abdullah, MSTA, CFTe [email protected] Head of Institutional Research (603) 2297 8694 • Strategy • Metals & Mining • Cement (84) 8 44 555 888 x 8181 STRATEGY [email protected] Rahmi MARINA [email protected] Sadiq CURRIMBHOY • Strategy • Consumer • Diversified SINGAPORE (62) 21 8066 8689 Global Strategist [email protected] THAI Quang Trung, CFA, (65) 6231 5836 Neel SINHA Head of Research • Banking & Finance Deputy Head, Institutional Research [email protected] (65) 6231 5838 [email protected] Aurellia SETIABUDI (84) 8 44 555 888 x 8180 • Strategy Willie CHAN (62) 21 8066 8691 [email protected] • SMID Caps – Regional [email protected] Hong Kong / Regional • Real Estate • Construction • Materials • Property (852) 2268 0631 CHUA Su Tye [email protected] (65) 6231 5842 [email protected] Janni ASMAN LE Nguyen Nhat Chuyen • REITs (62) 21 8066 8687 (84) 8 44 555 888 x 8082 FIXED INCOME [email protected] [email protected] Derrick HENG, CFA • Cigarette • Healthcare • Retail • Oil & Gas Winson Phoon, ACA (65) 6231 5843 [email protected] (603) 2074 7176 • Property • REITs (Office) Adhi TASMIN NGUYEN Thi Ngan Tuyen, [email protected] (62) 21 8066 8694 Head of Retail Research Luis HILADO [email protected] (84) 8 44 555 888 x 8081 Se Tho Mun Yi (65) 6231 5848 [email protected] • Plantations [email protected] (603) 2074 7606 • Telcos • Food & Beverage • Oil&Gas • Banking [email protected] PHILIPPINES John CHEONG, CFA TRUONG Quang Binh, Minda OLONAN Head of Research (65) 6231 5845 [email protected] Deputy Head, Retail Research • Small & Mid Caps • Healthcare • Transport (63) 2 849 8840 (84) 4 44 555 888 x 8087 [email protected] [email protected] NG Li Hiang • Strategy • Rubber Plantation • Tyres and Tubes • Oil&Gas (65) 6231 5840 [email protected] Katherine TAN • Banks (63) 2 849 8843 TRINH Thi Ngoc Diep (84) 4 44 555 888 x 8208 [email protected] • Banks • Construction [email protected] • Technology • Utilities • Construction Luis HILADO (65) 6231 5848 [email protected] NGUYEN Thi Sony Tra Mi • Telcos (84) 8 44 555 888 x 8084 [email protected] • Port Operation • Pharmaceutical • Food & Beverage
NGUYEN Thanh Lam (84) 4 44 555 888 x 8086 [email protected] • Technical Analysis
December 12, 2017 22
Jumbo Group Ltd
APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES
DISCLAIMERS This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdiction’s stock exchange in the equity analysis. Accordingly, investors’ returns may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report. The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad, its subsidiary and affiliates (collectively, “MKE”) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees (collectively, “Representatives”) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice. This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events. MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solicit business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report to the extent permitted by law. This report is prepared for the use of MKE’s clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for the actions of third parties in this respect. This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. This report is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this report. Malaysia Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis. Singapore This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (“Maybank KERPL”) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law. Thailand Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of Maybank Kim Eng Securities (Thailand) Public Company Limited. Maybank Kim Eng Securities (Thailand) Public Company Limited (“MBKET”) accepts no liability whatsoever for the actions of third parties in this respect. Due to different characteristics, objectives and strategies of institutional and retail investors, the research reports of MBKET Institutional and Retail Research Department may differ in either recommendation or target price, or both. MBKET Retail Research is intended for retail investors (http://kelive.maybank- ke.co.th) while Maybank Kim Eng Institutional Research is intended only for institutional investors based outside Thailand only. The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. MBKET does not confirm nor certify the accuracy of such survey result. The disclosure of the Anti-Corruption Progress Indicators of a listed company on the Stock Exchange of Thailand, which is assessed by Thaipat Institute, is made in order to comply with the policy and sustainable development plan for the listed companies of the Office of the Securities and Exchange Commission. Thaipat Institute made this assessment based on the information received from the listed company, as stipulated in the form for the assessment of Anti- corruption which refers to the Annual Registration Statement (Form 56-1), Annual Report (Form 56-2), or other relevant documents or reports of such listed company. The assessment result is therefore made from the perspective of Thaipat Institute that is a third party. It is not an assessment of operation and is not based on any inside information. Since this assessment is only the assessment result as of the date appearing in the assessment result, it may be changed after that date or when there is any change to the relevant information. Nevertheless, MBKET does not confirm, verify, or certify the accuracy and completeness of the assessment result. US This third-party research report is distributed in the United States (“US”) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (“Maybank KESUSA”), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. This report is not directed at you if MKE is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investments to you under relevant legislation and regulations. All U.S. persons receiving and/or accessing this report and wishing to effect transactions in any security mentioned within must do so with: Maybank Kim Eng Securities USA Inc. 777 Third Avenue 21st Floor New York, New York 1- (212) 688-8886 and not with, the issuer of this report.
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UK This document is being distributed by Maybank Kim Eng Securities (London) Ltd (“Maybank KESL”) which is authorized and regulated, by the Financial Conduct Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers. DISCLOSURES
Legal Entities Disclosures Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938- H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This report is distributed in Singapore by Maybank KERPL (Co. Reg No 198700034E) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Maybank Kim Eng Securities (“PTMKES”) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the Financial Services Authority (Indonesia). Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Philippines: Maybank ATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange Commission. Vietnam: Maybank Kim Eng Securities Limited (License Number: 117/GP-UBCK) is licensed under the State Securities Commission of Vietnam. Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (“KESI”) is a participant of the National Stock Exchange of India Limited and the Bombay Stock Exchange and is regulated by Securities and Exchange Board of India (“SEBI”) (Reg. No. INZ000010538). KESI is also registered with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) and as Research Analyst (Reg No: INH000000057) US: Maybank KESUSA is a member of/ and is authorized and regulated by the FINRA – Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Conduct Authority.
Disclosure of Interest Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies.
Singapore: As of 12 December 2017, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report.
Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report.
Hong Kong: As of 12 December 2017, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report.
India: As of 12 December 2017, and at the end of the month immediately preceding the date of publication of the research report, KESI, authoring analyst or their associate / relative does not hold any financial interest or any actual or beneficial ownership in any shares or having any conflict of interest in the subject companies except as otherwise disclosed in the research report.
In the past twelve months KESI and authoring analyst or their associate did not receive any compensation or other benefits from the subject companies or third party in connection with the research report on any account what so ever except as otherwise disclosed in the research report.
MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment and may receive compensation for the services provided from the companies covered in this report.
OTHERS Analyst Certification of Independence The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.
Reminder Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.
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Historical recommendations and target price: Jumbo Group Ltd (JUMBO SP)
13 Jun 15 Aug 27 Sep 14 Feb 15 Feb 16 May Buy : SGD0.6 Hold : SGD0.7 Buy : SGD0.8 Hold : SGD0.8 Hold : SGD0.8 Hold : SGD0.7 0.8
0.8
0.7
0.7
0.6
0.6
0.5 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17
Jumbo Group Ltd
Definition of Ratings Maybank Kim Eng Research uses the following rating system BUY Return is expected to be above 10% in the next 12 months (excluding dividends) HOLD Return is expected to be between - 10% to +10% in the next 12 months (excluding dividends) SELL Return is expected to be below -10% in the next 12 months (excluding dividends)
Applicability of Ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies.
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Jumbo Group Ltd
Malaysia Singapore London New York Maybank Investment Bank Berhad Maybank Kim Eng Securities Pte Ltd Maybank Kim Eng Securities Maybank Kim Eng Securities USA (A Participating Organisation of Maybank Kim Eng Research Pte Ltd (London) Ltd Inc Bursa Malaysia Securities Berhad) 50 North Canal Road PNB House 777 Third Avenue, 21st Floor 33rd Floor, Menara Maybank, Singapore 059304 77 Queen Victoria Street New York, NY 10017, U.S.A. 100 Jalan Tun Perak, London EC4V 4AY, UK 50050 Kuala Lumpur Tel: (65) 6336 9090 Tel: (212) 688 8886 Tel: (603) 2059 1888; Tel: (44) 20 7332 0221 Fax: (212) 688 3500 Fax: (603) 2078 4194 Fax: (44) 20 7332 0302
Stockbroking Business: Hong Kong Indonesia India Level 8, Tower C, Dataran Maybank, Kim Eng Securities (HK) Ltd PT Maybank Kim Eng Securities Kim Eng Securities India Pvt Ltd No.1, Jalan Maarof Level 30, Sentral Senayan III, 22nd Floor 2nd Floor, The International, 59000 Kuala Lumpur Three Pacific Place, Jl. Asia Afrika No. 8 16, Maharishi Karve Road, Tel: (603) 2297 8888 1 Queen’s Road East, Gelora Bung Karno, Senayan Churchgate Station, Fax: (603) 2282 5136 Hong Kong Jakarta 10270, Indonesia Mumbai City - 400 020, India
Tel: (852) 2268 0800 Tel: (62) 21 2557 1188 Tel: (91) 22 6623 2600 Fax: (852) 2877 0104 Fax: (62) 21 2557 1189 Fax: (91) 22 6623 2604
Philippines Thailand Vietnam Saudi Arabia Maybank ATR Kim Eng Securities Inc. Maybank Kim Eng Securities Maybank Kim Eng Securities Limited In association with 17/F, Tower One & Exchange Plaza (Thailand) Public Company Limited 4A-15+16 Floor Vincom Center Dong Anfaal Capital Ayala Triangle, Ayala Avenue 999/9 The Offices at Central World, Khoi, 72 Le Thanh Ton St. District 1 Villa 47, Tujjar Jeddah Makati City, Philippines 1200 20th - 21st Floor, Ho Chi Minh City, Vietnam Prince Mohammed bin Abdulaziz Rama 1 Road Pathumwan, Street P.O. Box 126575 Tel: (63) 2 849 8888 Bangkok 10330, Thailand Tel : (84) 844 555 888 Jeddah 21352 Fax: (63) 2 848 5738 Fax : (84) 8 38 271 030 Tel: (66) 2 658 6817 (sales) Tel: (966) 2 6068686 Tel: (66) 2 658 6801 (research) Fax: (966) 26068787
South Asia Sales Trading North Asia Sales Trading Kevin Foy Andrew Lee Regional Head Sales Trading [email protected] [email protected] Tel: (852) 2268 0283 Tel: (65) 6636-3620 US Toll Free: 1 877 837 7635 US Toll Free: 1-866-406-7447
Malaysia Thailand Joann Lim Tanasak Krishnasreni [email protected] [email protected] Tel: (603) 2717 5166 Tel: (66)2 658 6820
Indonesia London Harianto Liong Mark Howe [email protected] [email protected] Tel: (62) 21 2557 1177 Tel: (44) 207-332-0221
New York India James Lynch Sanjay Makhija [email protected] [email protected] Tel: (212) 688 8886 Tel: (91)-22-6623-2629
Vietnam Philippines Patrick Mitchell Keith Roy [email protected] [email protected] Tel: (84)-8-44-555-888 x8080 Tel: (63) 2 848-5288 www.maybank-ke.com | www.maybank-keresearch.com
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