Invest in Jumbo Group?
2017 is a milestone year for Jumbo Group as the F&B outfit celebrates its 30th anniversary. Listed in SGX Catalist only in 2015, Jumbo counts sovereign wealth fund, Temasek Holdings and Osim founder, Ron Sim, among its major shareholders. Temasek Holdings has a stake of 1.24% while Ron Sim holds 10%. With such strong support from institutional investors, is Jumbo Group a safe bet for retail investors and is it worth the effort to invest in this counter?
Share performance
In my last article in December 2016, I wrote that the share price was on bullish form. Indeed, there was a minor bull run which saw Jumbo share price surging to a peak of $0.78 in February 2017. Subsequently, the shares went on a correction mode and tumbled to a low of $0.54. It was only in recent weeks that the share price recovered to $0.60 level.
Despite its share performance, I like the growth story of Jumbo Group. The revenue had been growing consistently from $87.6 million in FY2012 to $136 million in FY2016, demonstrating management’s track record in growing the company. For the 9 months ending in FY2017, the revenue amounted to $106 million. Based on projection, it is likely that total revenue for FY2017 would surpass the previous years. Similarly, profit before tax had been rising from $8.8 million in FY2012 to $18.4 million in FY2016. Profit for FY2017 is also likely to exceed FY2016, barring unforeseen circumstances.
Business model
The main thing I like about Jumbo Group is that the business model is simple and can be scalable. Basically, as a multi-concept dining food and beverage company, the Group’s network of F&B outlets (including those of its associated companies and those under licensing arrangements) spans Singapore, the PRC, Japan and Vietnam. Jumbo also provides catering services for customers in Singapore, and sells packaged sauces and spice mixes for some of its signature dishes in its outlets, selected stores, supermarkets, travel agencies and online via the JUMBO eShop.
The recent opening of the first Jumbo Seafood outlet in Beijing was part of its plan to expand in China using the proceeds from the IPO. The new restaurant will be the Group’s fourth Jumbo Seafood in China (it already has three restaurants in Shanghai). Besides China, Jumbo Group has 15 restaurants in Singapore, one joint-venture restaurant in Japan and 1 franchise outlet in Vietnam. With staff strength of about 1000, Jumbo Group sells more than 1.7 tonnes of crabs each day and serves more than 7,500 diners each day.
Revenue sources
The decision to diversify revenue sources from different countries and different businesses (catering and franchises) is needed because [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
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