Bumpy path to recovery
? 1HFY9/22 net loss of S$4.5m was below our expectations due to Omicron
impacts. Significant easing of Covid measures in Singapore will aid recovery.
? However, key overhang is strict Covid-19 restrictions in China (7 outlets). We
now expect Jumbo to remain loss-making in FY22F (S$5m net loss).
? Reiterate Hold with lower TP of S$0.30, still based on 20.5x CY23F P/E.
1HFY22: higher revenue but slightly wider operating loss
Jumbo’s net loss widened to S$4.5m in 1HFY9/22 (1HFY21 loss: S$4.3m), below
expectations due to slow recovery in Singapore with the emergence of the Covid-19
Omicron variant. Excluding government grants, 1HFY22 EBIT loss would be S$4.2m,
narrower yoy (1HFY21: S$5.1m). Revenue from Singapore recovered to S$30m (+68%
hoh, +14% yoy), mainly supported by Jumbo’s diversification into the mass market (Kok
Kee Wonton Noodle) as well as new brand initiatives (JUMBO Signatures, Slake and
Hack it), which offset negative impacts from smaller dine-in size restrictions. Meanwhile,
revenue from China grew to S$17m (+0.4% hoh, +12% yoy), driven by contribution from
a newly-opened outlet at Universal Beijing Resort. GPM improved 0.4% pts yoy as
Jumbo stabilised its promotional efforts.
Singapore set for further recovery, but pace will be gradual
Covid restrictions in Singapore were significantly relaxed in Apr, including 1) removal of
dine-in group size limits, 2) lifting of 10.30pm curfew for alcohol sales and consumption,
3) allowing 100% return of employees to the office, and 4) easing of border restrictions.
We believe these relaxations will be supportive of Jumbo’s sales recovery (specifically for
JUMBO Seafood restaurants, and Zui Teochew Cuisine which is located in CBD) in
Singapore, boosting customer flows from its key market segments – tourists, business
crowds, and locals. In the near term, we expect the recovery to be driven mainly by
business crowds and locals; recovery in tourist arrivals could be more gradual, as most
North Asian countries have yet to announce broad-based relaxation of border restrictions.
Strict Covid-19 restrictions still an overhang for China outlets
We believe Jumbo’s 2HFY22 China revenue will be impacted by ongoing Covidrestrictions imposed in Shanghai and Beijing (Jumbo operates seven outlets across the
two cities). While Shanghai is aiming to end its lockdown by Jun 2022, we think domestic
spending could take time to recover. We now expect Jumbo to remain loss-making in
FY22F, projecting S$5.0m net loss vs. S$1.9m net profit previously.
Reiterate Hold, TP lowered to S$0.30
We see a bumpy road to recovery given the ongoing uncertainties in China; maintain
Hold. As we cut our FY23-24F EPS to reflect slower recovery expectations, our TP dips
to S$0.30, still based on 20.5x CY23F P/E (-1.5 s.d. from pre-Covid 3-year mean).
Upside risks include newsflow on North Asia border reopening and easing of domestic
restrictions in China. Downside risks include prolonged Covid restrictions in China.