Jumbo

Jumbo: (S$0.38) FY15 in line; expect a fleshier FY16
The seafood restaurant chain posted FY15 earnings were in line with expectations with net profit falling 8% y/y to $10.6m on restructuring and IPO expenses.

Revenue grew 9.2% to $122.8m mainly due to full year revenue contributions from its new outlets, namely, J Café, JPOT at Parkway Parade, and its first Jumbo Seafood outlet in Shanghai. A second outlet in Shanghai was opened in Aug ‘15.

An increase in customers as well as average spending at its Riverside and Gallery outlets also helped to boost its topline performance.

Overall, the group’s domestic operations accounted for about 91.5% (FY14: 94.2%) of its total revenue with the remaining 8.5% contributed from its Shanghai operations indicating its push into China.

The revenue growth was however negated by:
1. A jump in staff costs to $34.8m (+14.2%) due to its business expansion as well as increased business activity at existing outlets
2. Increased operating lease expenses of $8.8m (+16.8%) due to additional rental expenses of its new JPOT outlet as well as an additional office unit coupled with higher rentals for existing outlets.
3. Additional other operating expenses of $13.1m (+14.4%) on professional fees arising from its restructuring exercise as well as preparation work for its recent IPO

On outlook, the group opines that the operating environment continues to remain challenging. Despite this, it remains on track to open its third outlet in Shanghai by Jan ‘16. The group expects both the second and third outlets to contribute positively to its bottom line within six months of opening.

Further down the road, it intends to establish an additional three outlets either in China or Singapore within the next two years. The group will also start paying out at least 30% of its net profits as dividends in FY16/17.

A local brokerage highlights that following the group’s restructuring exercise profit from fellow co-operative ventures, some non-controlling interests will be consolidated into PATMI as the various stakeholders had swapped their interests for shares in the group during the IPO. The broker has a Buy rating on the counter with a TP of $0.49.