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Jumbo to buy 75% stake in Kok Kee Wanton Noodle; posts full-year S$8.2m loss
FOOD and beverage (F&B) play Jumbo Group 42R is looking to acquire a 75 per cent interest in popular dumpling noodle stall Kok Kee Wanton Noodle for S$2.1 million in cash and shares.
Separately, Jumbo slipped into the red for its fiscal year ended Sept 30, 2020 as the coronavirus pandemic took a heavy toll on the F&B sector, according to results released late Thursday night.
The Kok Kee deal will mark the first inorganic expansion for the group since it listed in 2015.
Jumbo, whose portfolio of F&B brands include Jumbo Seafood, Ng Ah Sio Bak Kut Teh and Zui Teochew Cuisine, said that it plans to expand Kok Kee's network locally.
It also intends to introduce the "heritage local dish" of wanton mee, or Chinese dumpling noodles, to geographies beyond Singapore.
Kok Kee's owner, Leong Goh Lian, will continue to hold the remaining quarter stake, if the acquisition goes through.
The purchase price of S$2.1 million was determined after arm's length negotiations, taking into account factors such as the existing assets, intellectual property rights and business prospects of Kok Kee.
Jumbo will use its internal resources to pay 70 per cent of the purchase price in cash, while 30 per cent will be satisfied by the allotment and issuance of Jumbo shares based on an agreed formula. The purchase price will be paid in two lump-sum tranches.
The food-stall business operating under the Kok Kee Wanton Noodle name and the trademark used in association therewith started in 1985 as a stall at Lavender Food Square in Singapore. It later moved to Hoa Nam Building in Jalan Besar, but ceased operations between 2016 and 2019 before reopening at its present location in the Bistro 8 coffee shop at 30 Foch Road.
Jumbo said that the Kok Kee business, known for its springy noodles and lard-based sauce, is a familiar name among many Singaporeans.
The Catalist-listed firm said it is continually exploring opportunities to expand its brands and concepts to strengthen its foothold in the Singapore F&B sector.
"Hawker food and culture is a deeply entrenched aspect in the lives of all Singaporeans. Supporting and having a stake in a day-to-day staple food concept will accelerate Jumbo's breakthrough into the local mass segment," Jumbo noted in its bourse filing.
The proposed acquisition will also enable Jumbo to diversify its income streams away from its current dominant concepts, which revolve around full-service dine-in restaurants, it added.
"Jumbo is cautiously optimistic of the future prospects of Kok Kee and the business as it caters primarily to the local mass market, well suited for fast turnover dine-in or takeaway," the company noted.
Its group chief executive officer and executive director, Ang Kiam Meng, said that Singapore's unique food culture should be conserved and propagated.
Meanwhile, Jumbo reported a net loss of about S$8.2 million for its financial year ended Sept 30, reversing from a net profit of S$11.7 million in the previous year.
Loss per share stood at 1.3 Singapore cents for FY20, versus earnings per share of 1.8 cents for FY19.
Revenue tumbled 36.5 per cent to S$97.6 million, from S$153.6 million a year ago, mainly due to the impact of Covid-19.
In China, government-imposed restrictions "significantly impacted" the group's operations there, while the resulting dampened consumer sentiment also led to lower footfall at malls, which in turn resulted in a drop in sales at Jumbo's outlets. As such, revenues from the Chinese New Year season was "significantly lower" than previous years' takings, the company added.
Further, it closed an underperforming Jumbo Kitchen outlet at Raffles City, Shanghai, prior to the expiry of its lease.
In Singapore, the "circuit breaker", which started in April and lasted till June, banned dining in, which meant Jumbo operated only six of its 16 outlets in the country, to cater for deliveries and takeaways only.
The company's Singapore outlets in tourist areas, such as Ng Ah Sio Bak Kut Teh at Marina Bay Sands and Resorts World Sentosa, remained closed until July. Two of its highest revenue-generating Jumbo Seafood outlets, at Riverside Point and The Riverwalk, also saw "visibly lower footfall", as they had been popular among tourists.
No dividend was declared for the latest fiscal year. The group had declared a final dividend of 0.7 cent per share for FY19.
Shares of Jumbo finished Thursday unchanged at S$0.32, before the announcements.