Brokers’ take: CGS-CIMB upgrades Jumbo to ‘add’ on expected near-term profits
Renald Yeo
CGS-CIMB upgraded its call on Jumbo Group to “add” from “hold” as the research house expects a “much stronger” FY2023 performance for the restaurant operator in both Singapore and China.
This came after Jumbo’s latest set of FY2022 results exceeded expectations, with a significantly narrower-than-forecast full-year net loss due to profitability booked in H2.
CGS-CIMB also raised its target price to S$0.35 from S$0.30, after factoring in valuations for 2024 with a price-to-earnings ratio of 20 times, three standard deviation points below Jumbo’s three-year historical mean.
On Tuesday (Dec 13), analysts said they foresee a further ramp-up in FY2023 Singapore revenue, due to a gradual resumption of tourism from North Asia to Singapore, coupled with higher contributions from new outlets opened in FY2022.
Jumbo’s Singapore revenue constituted the bulk of its topline, and was notably close to pre-Covid levels in FY2022.
The research house also said the group’s restaurant footfalls in China are set for a steady recovery in 2023 amid easing Covid-19 restrictions – particularly Jumbo’s restaurant in Universal Studios Beijing, which commenced operations in September 2021.
CGS-CIMB forecast a “significant rebound” in Jumbo’s FY2023 net profit to some S$8.6 million.
Its analysts cautioned of potential headwinds arising from additional Covid-19 restrictions in China, along with rising cost pressures that could erode Jumbo’s margins.
Shares of Jumbo Group were trading at S$0.30 on Wednesday as at 2.45 pm, up S$0.01 or 3.5 per cent.
Copyright SPH Media. All rights reserved.
