RESTAURANT operator Jumbo Group : 42R 0% will likely face a bumpy road to recovery given the ongoing uncertainties in China, CGS-CIMB said.

In a report on Tuesday (May 17), the research team trimmed its target price on the counter to S$0.30 from S$0.31, after it cut its estimates for Jumbo’s earnings per share in FY2023 and FY2024.

CGS-CIMB maintained its “hold” call on the stock, noting that Jumbo will likely face a slower recovery journey.

Shares of Jumbo Group closed at 28.5 Singapore cents on Wednesday, down 0.5 cent or 1.7 per cent.

On May 12, Jumbo posted a net loss of S$4.5 million for its first half ended March, widening from S$4.3 million in the same period a year earlier. Revenue from Singapore recovered to S$30 million mainly due to Jumbo’s diversification into the mass market and new brand initiatives, while revenue from China grew to S$17 million due to contribution from a newly-opened outlet.

The research team said the results were below expectations due to slower recovery in Singapore amid the Omicron variant.

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It now projects Jumbo will post a net loss of S$5 million in FY2022, from previous forecasts of a net profit of S$1.9 million, as ongoing Covid-19 restrictions in Shanghai and Beijing will likely weigh on Jumbo’s H2 revenue in China. Jumbo operates 7 outlets across the 2 cities.

But in Singapore, CGS-CIMB expects sales recovery will be supported by the significant relaxing of Covid-19 restrictions from April, particularly for Jumbo Seafood restaurants and Zui Teochew Cuisine located in the Central Business District.

The relaxed restrictions should boost customer flows in Jumbo’s key market segments, which include tourists, business crowds and locals, the research team said.

In the near term, CGS-CIMB expects recovery in Singapore will be driven mainly by business crowds and locals, while recovery in tourist arrivals could be more gradual given that most North Asian countries have yet to announce broad-based relaxation of border restrictions.