Jumbo Group’s 30c Stock Price Seems Fishy And There’s Not Much On The Menu For Investors
Ask any Singaporean and they’ll tell you: Jumbo’s excellent reputation for fresh and varied seafood has been upheld and unrivalled since its inaugural East Coast opening in 1987.
Never short of a crowd (pre-pandemic), Jumbo served as the perfect host for celebrations, birthdays and even just hangry days.
Jumbo’s success isn’t just anecdotal either. Among its many accolades, Jumbo has won the Best Taste of Singapore 2020 Award, TimeOut Food Awards 2020, International Casual Dining of The Year and Best Asian Restaurant at the China Feast Restaurant Awards 2019/2020.
However, with the pandemic continuing to paralyse Singapore’s F&B business, should investors continue to fish in the sector or is Jumbo a bite worth waiting for?
Jumbo Has Cast Its Net Wider As It Fishes For More Than Just Seafood
As its registered company name suggests, Jumbo Group operates as a group. Under its umbrella, Jumbo owns a plethora of F&B outlets that are not limited to seafood. Ng Ah Sio Bak Kut Teh, Zui Teochew Cuisine, Chao Ting, Xinyao Hainanese Chicken Rice, Hack It, Kok Kee Wanton Noodle, Singapore Seafood Republic and Tsui Wah (Singapore) are all owned by the Jumbo Group.
Through these outlets, Jumbo brings a taste of Singapore to 15 cities in Asia including Tokyo, Seoul, Taipei, Ho Chi Minh and Shanghai.
At this point, if you’re reading this and scratching your head, you’re not alone. We’ve also not heard of the majority of Jumbo’s other restaurants, except for Hong Kong’s Tsui Wah. Playing an essential role in every Hong Kong partygoers’ post-LKF meal, Tsui Wah’s popularity has risen among the younger crowd in the region and has also proven itself in Singapore too.
As for the Jumbo’s other restaurants, Singapore’s heavy concentration of local cuisine restaurants results in many of these outlets going undetected.
That said, Ng Ah Sio Bak Kut Teh did win two FLA Awards 2019: Promising Franchisor of the Year and Customer Service Excellence.
Jumbo’s group of restaurants should serve as a safety barrier for investors. If the appetite for seafood decreases, foodies craving other Singaporean staples such as bak ku teh, chicken rice and wanton mee will keep the company afloat.
However, in a market that’s oversaturated at a time when dining in is restricted, Jumbo’s vast exposure to the F&B industry feels more of a curse than a charm.
Singapore’s F&B Market And Its Hermit (Crab) Society
Whilst some regard Singapore as a tax haven, foodies regard the as a food heaven. From hawker centres and street food to Michelin star fine dining, Singapore’s breadth of food variety reflects the nation’s broad and hungry palette.
However, as Singapore combats surging Covid cases and implements heavy-handed restrictions on its citizens, the Little Red Dot’s F&B industry is facing an unprecedented decline in demand.
According to a Department of Statistics Singapore report, total food and beverage sales declined 6.7% YoY in August 2021. Worse still, restaurants sales fell 24.5% YoY amid ongoing COVID-19 restrictions.
Currently, Singaporeans are restricted to dining in pairs on the provision that both customers are fully vaccinated. Jumbo’s familial style that encourages group dining and mammoth feasts is clearly at risk here.
That said, Singapore is on the brink of its aggressive opening to the world. Having added eight more countries to its Vaccinated Travel Lane scheme, Singapore is welcoming back travellers from some of its top trading partners.
If Singapore establishes a firm ‘just-live-with-it’ stance on COVID that facilitates the return of normality, group dining joints such as Jumbo will once again flourish.
Analysts Are Concerned About Jumbo’s Money In The (Sea) Bank
DBS analysts believe the market has overvalued Jumbo’s stock, and set a target price of SGD 0.21.
The pessimistic analysts fear that recovery will be deferred to next year. “We project weak near-term earnings, with a FY21F net loss, a partial recovery in FY22F, before making a full recovery from FY23F onwards,” the analysts wrote.
“Based on our current earnings projections, the market is valuing Jumbo Group at 28.0x FY22F P/E and 15.8x FY23F P/E, which we believe is overvalued and pricing it at normalised earnings way ahead of the COVID-19 recovery.”
Half of Jumbo’s diners comprise tourists, according to the analysts, who retain a conservative outlook on Singapore’s reopening.
“The absence of tourists in Singapore now and also in the near term will weigh on Jumbo Group’s recovery,” DBS analysts write.
Jumbo’s net losses of SGD 4.3 million were also highlighted by DBS, which had expected this year to be a recovery year.
Analysts have a right to be concerned too.
Jumbo’s 1H2021 (ending March 2021) report does little to whet investors’ appetites. Revenue declined 31.9% YoY from SGD 67 million to SGD 45 million, whilst gross profit fell 31.8% from SGD 42 million to SGD 28 million.
Jumbo Seafood And The Turning Of The Tides
Despite Jumbo’s troubling financials operating in a cold F&B environment, the restaurant group is nonetheless pushing ahead with its expansion plans.
At the end of September 2021, Jumbo opened a new Tsui Wah outlet at Changi Airport’s Jewel. As it stands, the outlet’s capacity is currently limited to only 88 seats out of 123 due to COVID-related social distancing restrictions.
Its location is interesting as Singapore begins opening its borders. Travellers looking to go on vacation abroad might find themselves popping in for a quick bite ahead of their flight.
A week prior, the group also opened its second Jumbo Seafood outlet in Beijing at the Universal Studios resort. Whilst Singapore may still be enforcing strict social distancing measures, movement in China is less restricted.
Universal Beijing Resort reopened towards the end of September, with all 10,000 entry tickets sold out in three minutes in a pre-sale earlier that month.
“We certainly look forward to bringing Singapore cuisine to the world with the opening of this latest Jumbo Seafood restaurant,” Jumbo group’s executive director and group chief executive officer Ang Kiam Meng.
Whilst analysts might be fearful in the short-term, Jumbo’s mindset clearly remains focused on the long-term, and this is music to every Buffett-style investor’s ears.
A Crabby Conclusion
At just SGD 0.30 a share, Jumbo feels like a penny stock. However, with a market cap just shy of SGD 200 million, Jumbo Group is sizable enough for long-term investors to consider.
However, the group’s turbulent 2021 has left a sour taste in many investors’ mouths. Jumbo’s declining profits and revenue under any circumstances continue to test even the most patient investors. Worse still, the light at the end of the tunnel remains dim.
With food delivery services amplifying the success of competitors who can adapt their menu for takeaway consumption, Jumbo’s position in Singapore’s F&B industry is dwindling. Although its umbrella restaurants can cater to delivery, Jumbo’s signature seafood dishes such as chili crab are far too inconvenient to order from home.
Looking ahead, Jumbo has positioned itself well for a strong recovery in the coming year, and its expansion both domestic and international are encouraging. But, as it stands, external factors stemming from Singapore’s COVID restrictions continue to weigh too heavily on Jumbo’s potential to lure in new investors.