Brokers' take

Jumbo Group | Buy

Target price: S$0.58

May 5 close: S$0.49

Maybank Kim Eng, May 4

WE visited Jumbo's newest restaurant at the IFC Mall in Shanghai last week and came away encouraged by what we observed. We hold on to our optimism that the IFC outlet could help China operations to turn around to profitability soon, perhaps as soon as Q2 FY9/16 which will be reported next week. It was operating at almost full house even on a Friday night; we were there for two hours and table turnover was rapid.

According to restaurant staff, per pax spend for the IFC outlet has exceeded 400 yuan just 3-4 months after opening, higher than the 368 yuan we assumed for FY16. Our order of a 1.2kg mud crab cost 720 yuan or S$125 per kg. This is 60 per cent higher than what it would cost in Singapore, and yet we observed crab orders on almost every table. Even after transport costs, as the crabs are imported from South-east Asia, PRC margins on this popular dish could be better than local margins, in our view. In addition, there was more variety on Jumbo's China menus, especially crabs, suggesting that PRC diners are still a long way from being …