Brokers' take

Jumbo Group | Hold Target price: S$0.44 Nov 22 close: S$0.405 DBS Group Research, Nov 22

Maintain "hold" with lower target price as we believe growth prospects are largely priced in. Q4 earnings of S$2.5 million (-7.3 per cent y-o-y) was below expectations, on the back of slightly lower than expected revenue of S$39.7 million (+4 per cent y-o-y).

We maintain our neutral stance as we await new outlets to start contributing to growth. While we believe the long-term growth outlook from regional outlet expansion is positive, near-term margins will be affected by higher operating expenses and expansion-related costs. We have cut FY19-20F earnings by 20-22 per cent as we have assumed that Jumbo is still in expansion mode, and will incur higher operating expenses. Longer term, we could see more franchises and new stores in existing and new locations including Thailand, Indonesia, Hong Kong, Macau, Korea, Xi'an, and Shenzhen turning in better performance after the initial phase.