Brokers’ take: SAC Capital initiates ‘buy’ for Jumbo Group on sales rebound
Yong Hui Ting
SAC Capital has initiated coverage on Catalist-listed Jumbo Group in a report published on Monday (Aug 1), propelled by optimistism on a sales rebound driven by pent-up domestic demand and tourist arrivals.
The corporate finance house recommended a “buy” on the seafood restaurant group, with a target price of S$0.38.
“With the reopening of the economy and removal of border restrictions, there is a strong pent-up demand for dining-out and an increase in tourists visits,” said analyst Yeo Peng Joon, who was also upbeat on consumption demand in China as movement restrictions ease.
Other upside factors listed include an enlargement of the footprint of Jumbo Seafood and other brands in Asia through the franchise model as well as a potential to raise prices in an inflationary environment, he added.
SAC Capital further expects Jumbo to narrow its losses in the upcoming FY2022 to S$5.7 million, from a net loss of S$11.8 million in FY2021. In FY2023, the finance house expects Jumbo to post a net profit of S$5.3 million.
This is however subject to headwinds that may arise from manpower shortages due to the low unemployment rate and stringent cap on foreign dependency ratio in Singapore, business uncertainties from China’s zero-Covid policy and rising costs with higher commodity prices, it added.
“Thus far, Jumbo has been able to pass this on and maintain gross margin, but it could face resistance if the macro environment weakens,” said Yeo, who also warned that recessionary pressure may lead to a cut-back in discretionary spending, especially on high-ticket meals.
Jumbo Group’s shares were trading flat at S$0.255 as at the midday trading break on Monday.
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