Brokers' take
Jumbo Group Ltd > Add CGS-CIMB, Oct 4 Oct 5 close: S$ 0.47 Target price: S$0.58
JUMBO Seafood outlets in Singapore continue to capitalise on their signature chilli crab dish, seen by their strong average monthly sales of S$148-159 per square foot in Oct 2014-March 2018, compared to the declining sales of the "No Signboard Seafood" restaurants, based on our estimates. Other F&B brands under the Jumbo group also showed improvement in sales per sq ft over the same period.
We project Jumbo would add two new Jumbo Seafood outlets in Singapore and one new Chui Huay Lim Teochew Cuisine outlet over the next 12 months. We project these three new restaurants could add S$35-S$40 million to group revenue by end-FY2020F.
If Jumbo maintains or reduces its costs per sq ft amid the opening of new outlets in Singapore and franchise expansion, we believe this would translate into uplift in FY2019-2020 net margins. We retain "add" but lower our target price to S$0.58. Risk is escalation in cost per sq ft from new outlets.
StarHub > Buy Maybank Kim Eng, Oct 4 Oct 5 close: S$1.97 Target price: S$2.21
MANAGEMENT will be cutting headcount by 300 or 12 per cent of its 2,500 workforce as part of its digitalisation and reorganisation efforts. The S$25 million restructuring cost has no impact on 2018 guidance as provisions were made in prior periods. Factoring in both S$30 million of annual staff reduction costs for 2019 onwards, we raise core earnings per share by 11-15 per cent.
Management also intends to rationalise procurement, leasing, repair & maintenance and distribution costs. Its target is to save S$210 million over 2019-2021. Part of the savings will be re-channelled to new growth opportunities which will lessen the positive net cash flow impact.
As such, we have only taken staff-cost savings in our new forecasts. With staff-cost savings alone and no other changes in revenues or opex, our 2019-2020 forecasts are already significantly raised. Admittedly, new competition from Q4 2018 onwards and possible ownership changes at another competitor could affect the industry and StarHub's revenue outlook.
Compiled by Wong Kai Yi
