Jumbo

Jumbo’s seasonally softer 1QFY16 headline net profit came in at $2.1m (+1.1% y/y). Excluding IPO expenses, core earnings surged 35% to $2.8m,in line with market expectations.

Revenue rose 7.6% to $30.9m, mainly driven by the second outlet in Shanghai, China (+69%), which opened in Aug ’15, while Singapore sales held steady at 3% growth.

EBIT margin narrowed slightly by 0.9ppt to 8.1% amid higher staff cost (+10.3%) and other operating expenses (+11.8%), which included IPO expenses f $0.7m.

Maybank-KE views the performance as commendable after taking into account the IPO cost, pre-operating expenses for third Shanghai outlet and increased head office expenses as a listed entity.

2QFY16 earnings are expected to bounce strongly from the Lunar New Year festivities, additional sales from the third Shanghai outlet, which opened in mid Jan, and potentially higher table spend from new premium menus and customers. Traditionally, the 2Q makes up 35-40% of full year earnings.

Further, the house sees positive catalyst stemming from management guidance that the new Chinese outlets will need a six-months gestation to turn profitable, shorter than the one year period for the first outlet to achieve breakeven.

Maybank-KE reiterates its Buy rating and a TP of $0.58 on the seafood restaurateur.

Jumbo is currently trading at a 18x FY16 consensus P/E.