0.440 160 january 3, 2016 statistics jumbo group ltd

January 3, 2016

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SEE PAGE 43 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS Co. Reg No: 198700034E MICA (P) : 099/03/2012

Gregory Yap [email protected] (65) 6231 5848

Jumbo Group Ltd (JUMBO SP)

Give Me More Of This Crab

Initiating coverage: BUY to SGD0.58 TP

Jumbo’s highly-profitable seafood restaurants and signature crab dishes

are much loved in Singapore and now, being successfully exported to

China where it has three outlets. With its far bigger market potential and

high ROI, there is room to add one new outlet in China a year as new

outlets fully recoup investments in just 1-3 years. Jumbo deserves a

premium to peers for its uniquely-Singapore brand and product and first-

mover advantage in China. We initiate coverage with a BUY and DCF-P/E

blended TP of SGD0.58.

Bringing a uniquely Singapore dish to China

Jumbo’s expansion in China is just beginning. The mainland Chinese have

taken to chilli crabs in droves, and we think this expansion will provide

years of double-digit growth to come. We project accelerating earnings

growth of 9%/11%/20% in FY16E-18E, driving China from a 10% market

now to 32% of revenue by FY18E. By our estimates, its China outlets are

capable of generating ROI of 32-86% with a relatively short payback

period of 1-3 years which reduces risk.

More than just crabs that can travel

Jumbo has demonstrated that it can successfully replicate its seafood-

restaurant business in China. But it has other dining concepts (eg hotpot,

Teochew cuisine, bak kut teh) that can be exported overseas as well, not

just in China but the rest of South-east Asia. Gross margins for all its

brands run in the 40-60% range, and with scale, we see room for upside.

Deserving of a tasty premium

We value Jumbo at SGD0.58 for c.40% potential upside. We use blended

P/E and DCF valuations to capture the full value of its mid-term

expansion potential. This values Jumbo at 25x FY16E, 22x FY17E and 19x

FY18E EPS, a slight premium to its regional peers. Our DCF valuation of

SGD0.65 is conservative, assuming a higher-than-usual 10% market return

and 1.2x beta for possibly higher risks from its China expansion.

Good growth, high margins, strong cashflow: What more can you ask for?

Share Price SGD 0.43

12m Price Target SGD 0.58 (+36%)

BUY

Company description

Statistics

52w high/low (SGD)

3m avg turnover (USDm)

Free float (%)

Issued shares (m)

Market capitalisation

Major shareholders:

57.9%

6.6%

6.2%

641

3.8

F&B retailer in Singapore and China, most famous for

its chilli crabs and JUMBO Seafood brand JPOT

Hotpot. Has five other brands in its stable.

JBO Holdings

Mr Tan Gee Jian

Orchid 1 Investments

na/na

24.3

SGD272.6M

USD193M

Price Performance

90

100

110

120

130

140

150

160

0.300

0.320

0.340

0.360

0.380

0.400

0.420

0.440

Nov-15 Nov-15 Nov-15 Nov-15 Dec-15 Dec-15 Dec-15 Dec-15

Jumbo Group Ltd - (LHS, SGD) Jumbo Group Ltd / Straits Times Index - (RHS, %)

-1M -3M -12M

Absolute (%) 8 na na

Relative to index (%) 6 na na

Source: FactSet

FYE Sep (SGD m) FY14A FY15A FY16E FY17E FY18E

Revenue 112 123 147 169 191

EBITDA 19 18 22 25 31

Core net profit 13 14 15 17 20

Core EPS (cts) 2.1 2.1 2.3 2.6 3.1

Core EPS growth (%) 39.8 3.0 8.6 11.1 20.5

Net DPS (cts) 0.0 8.1 0.7 0.8 0.9

Core P/E (x) 20.4 19.8 18.3 16.4 13.6

P/BV (x) 5.8 4.8 6.3 4.9 3.9

Net dividend yield (%) 0.0 19.0 1.6 1.8 2.2

ROAE (%) 31.8 26.4 29.8 33.7 31.8

ROAA (%) 20.8 17.8 18.5 19.2 19.0

EV/EBITDA (x) na na 10.3 9.1 7.3

Net debt/equity (%) net cash net cash net cash net cash net cash

Consensus net profit - - na na na

MKE vs. Consensus (%) - - na na na

0%

10%

20%

30%

40%

50%

60%

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

FY15 FY16E FY17E FY18E

(SGD'000)

Net cash Free cashflow

Core NP growth (RHS) Gross margin (RHS)

January 3, 2016 2

Jumbo Group Ltd

[email protected]

Company Proposition

A restaurant operator whose greatest value proposition is

ability to generate high demand for its business with

reasonable prices and consistent taste.

Iconic dishes, footprint of outlets in ideal locations, strong

brands and effective front- and back-end operations

provide high defensible margins.

Branding and identity that hinge on signature seafood such

as chilli crab, a national dish. Helps it stand out in

crowded markets especially when expanding overseas.

Low-cost cash business financed by suppliers’ credit. High

FCF generation supports aggressive expansion plans yet

provides future dividend support for shareholders.

How Jumbo stacks up on profitability & returns

Source: FactSet estimates, Maybank Kim Eng

Price Drivers

Revenue breakdown

Source: Company data, Maybank Kim Eng estimates

Listed just in Nov 2015, trading history is too short to

identify inflexion points. We believe market will focus on its

opening of new outlets in China and/or introduction of new

dining concepts.

1. Second China JUMBO SEAFOOD outlet opened in Raffles

City Shanghai in Aug 2015.

2. Third China outlet opening in IFC Mall in Jan 2016.

3. Fourth China outlet assumed to open in Oct 2016.

4. Fifth China outlet assumed to open in Oct 2017, fourth

JPOT outlet in Singapore assumed to open in mid-FY17

Financial Metrics

Revenue growth. Given two new JUMBO outlets in China,

would expect to see increasingly stronger topline growth

in next 3-4 quarters, unless other brands underperform.

EBIT & net margins. Gross margin (excluding direct costs

such as food & rental) is controllable. There may be

quarters of higher start-up costs where margins fall below

trend, but generally expect good indirect cost

management and efficient tax planning.

Watch for deteriorating asset & liability turns. Strong FCF

generation comes from AP days far exceeding AR and stock

days. Don’t be alarmed if FCF is dragged down by capex.

Strong revenue growth with stable margins expected


Swing Factors

Upside

Better-than-expected Singapore and China sales,

especially from new outlets.

Lower-than-expected food and staff costs that could lead

to better-than-expected margins.

Expectations of higher dividends or articulation of a

dividend policy.

Downside

Any changes in China’s food safety laws that could affect

China’s import of mud crabs.

Shortage of critical ingredients for its signature dishes:

crabs, other seafood.

Epidemics or health scares that can damage its

reputation or cuisine eg mass food poisoning, salmonella.

(6.0)

(4.0)

(2.0)

0.0

2.0

4.0

6.0

8.0

10.0

12.0

(70.0) (60.0) (50.0) (40.0) (30.0) (20.0) (10.0) 0.0 10.0 20.0 30.0 40.0

Avg 3Y ROE

Avg 3Y Net Margin

JumboJapan Foods

ABR Holdings

Soup Restaurant

BreadTalkSakae Holdings

Auric Pacific

Tung Lok

Flagship brands:Jumbo - JUMBO SEAFOODJapan Foods - Ajisen RamenABR - Swensen's, Gloria Jean's CoffeesSoup Restaurant - SOUPBreadTalk - Din Tai Fung, Carl's JrSakae Holdings - Sakae SushiAuric Pacific - Delifrance, Food JunctionTung Lok - TungLok, Lao Beijing

12.2% 12.3% 12.2% 13.2%10.4% 10.2% 9.8% 10.4%

9%

19%

15%

13%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%


EBIT margin Net margin Revenue growth

1

1 2 3 4

mailto:[email protected]

mailto:[email protected]

January 3, 2016 3

Jumbo Group Ltd

Fig 1: SWOT Analysis

Strengths

Strong branding in Singapore, widely known by locals.

Outlets well-located in key tourist hotspots.

14 restaurants in Singapore, two in China with five brands.

Front-end optimises diner-capture and outlet utilisation.

Back-end centralises cooking and food preparation.

Consistent taste of dishes through standardised

preparation of ingredients lowers staffing cost.

Weaknesses

Limited differentiation of menu, especially signature

seafood dishes.

Supply of seafood, especially crabs, may be affected by

disease or closure of source markets.

Rental costs may escalate, especially as expansion is

taking it into REIT-controlled malls.

Opportunities

Strong reception in China. Room to grow number of

outlets in Shanghai.

Capitalise on rising food-safety awareness in China as a

well-regarded Singapore brand.

Other brands can also be exported to China or South-east

Asia.

Expansion into higher-margin catering business.

Threats

New outlets or brands fail to take off.

Fluctuation of food cost (80% of COGS), especially seafood

which account for 70-80% of revenue.

Adverse food-safety developments could hurt revenue and

brand value.

Change in consumer tastes and preferences or sharp drop

in tourist arrivals could affect demand.

Source: Company data, Maybank Kim Eng

Fig 2: Porter’s Five Forces Model Analysis


Bargaining power of suppliers:

Low Top three seafood suppliers account

for less than 20% of COGS. Other fresh

ingredients are freely available on

the market.

Industry competition: High

Seafood restaurant business is fragmented. Jumbo’s biggest value proposition is in fair transparent prices and consistent taste that keeps customers coming back.

Bargaining power of

customers: Medium

Buyers can vote with their feet and wallets. However, Jumbo’s 48,000-member loyalty program acts to

dilute buyer power.

Threat of substitutes: Low

No substitute for signature chilli crab

which is a national dish of Singapore.

Threat of new entrants: Low-to-Medium

Anyone can start a seafood restaurant, but not many have as large a footprint as Jumbo or its

strong branding.

January 3, 2016 4

Jumbo Group Ltd

Table of Contents 1. Investment thesis 5

1.1 Deserving of a tasty premium 5

1.2 Catalyst #1: China expansion the main growth driver 5

1.3 Catalyst #2: More than just crabs that can be exported 5

1.4 Catalyst #3: May pay more dividends to get fatter ROEs 5

2. Company Background 6

2.1 The seafood specialist 6

2.2 Among the top 10 players locally 7

2.3 Taking the chilli crab to the hairy crab kingdom 7

2.4 Other hot & spicy brands that can also be exported 8

3. Industry Potential 10

3.1 Singapore on the global foodie’s trail… 10

3.2 …with crab at the top of the menu 11

3.3 China bursting with potential 11

4. Growth Drivers 13

4.1 Expand further in China 13

4.2 Attractive locations secured in China 14

4.3 Part of the solution for China’s retail challenges 16

4.4 Export other brands to the region 17

4.5 Acquisitions, JVs or strategic alliances 17

5. Barriers to Entry 18

5.1 Competitive with a clear path to growth 18

5.2 Food quality & safety a key mantra 18

5.3 Expand central kitchen & IT to enhance scalability 19

6. Forecasts & Assumptions 21

6.1 Sales to grow by 16% CAGR, NP 13% in FY16E-18E 21

6.2 China to be the main growth driver 21

6.3 Optimistic on China expansion 22

6.4 Singapore a sturdy mainstay 23

6.5 Why do we believe future expansion will favour JUMBO and JPOT? 23

6.6 Overall revenue assumptions 24

6.7 Margin trends should be stable 25

6.8 Well-financed, capex not a concern given ample FCF 26

6.9 Can afford to pay more dividends 27

7. Valuation & Target Price 31

7.1 Undervalued to regional peers 31

7.2 Deserving of a tasty premium 31

8. Risks & Concerns 34

8.1 Singapore tourism down but not a dealbreaker 34

8.2 Must keep reputation intact at all costs 34

8.3 Crab shortages 35

8.4 Possible earnings volatility until new outlets mature 35

Annex I: Listing Details 36

Annex II: Board of Directors/Senior Management 36

Annex III: Shareholding Details 39

January 3, 2016 5

Jumbo Group Ltd

1. Investment thesis

Restauranteur Jumbo Group is the leading brand in Singapore’s seafood

dining industry which accounts for 80% of its revenue. Its signature dishes

– chilli crab and black pepper crab – are widely available in Singapore,

varying only with the creativity of the chef. Singapore lays claim to chilli

crab as a “uniquely Singapore” dish, prompting other Southeast Asian

countries such as Malaysia to also lay claim to it as their own. For

investors, however, it is not so much the formulation or origin of this dish

but Jumbo’s brands, execution, well-tested systems and growth strategy

that merit investment. We forecast accelerating earnings growth of

9%/11%/20% in FY16E-18E, underpinned by expansion in China, and

initiate coverage with a BUY and blended DCF-P/E TP of SGD0.58.

1.1 Deserving of a tasty premium We value Jumbo at SGD0.58 for c.40% upside potential. We use blended

P/E and DCF valuations to capture the full value of its expansion prospects

that should take more than a year to pan out. This values Jumbo at 25x

FY16E, 22x FY17E and 19x FY18E EPS, a slight premium to its regional

peers. We think this is reasonable. Our DCF valuation is conservative, as

we have assumed a higher-than-usual 10% market rate of return and 1.2x

beta to account for possibly higher risks associated with its aggressive

China expansion. We employed five-year forecasts up until 2020 and

assumed steady-state expansion of 5% pa until 2025.

1.2 Catalyst #1: China expansion the main growth driver China is expected to generate the biggest revenue and earnings growth for

Jumbo, justifying the addition of four outlets in FY15-FY18E, of which two

have been confirmed for FY15-FY16E. The early results have been

overwhelmingly positive for Jumbo. China accounted for 6% of group

revenue in the year that its first outlet opened in FY14. This number

climbed to 9% by the second year in FY15, all from just one outlet in

Shanghai. Profitability was achieved by the end of the first year. The

additional outlets we have forecasted are expected to lift China’s revenue

contributions to 32% by FY18E, with the biggest jump in FY16E from two

new outlets in Aug 2015 and Jan 2016 respectively.

1.3 Catalyst #2: More than just crabs that can be exported While Jumbo’s seafood business can be easily replicated in different

markets, it has four other brands in Singapore that we think can be

profitably exported overseas as well. Gross margins for all its brands run

in the 40-60% range and with scale, we see room for upside. Financing

expansion capex is not a problem at all. Jumbo generates solid cash flows

as it’s mostly a cash business with almost no credit terms. Nothing is kept

in stock for long, and what’s more, suppliers are financing its business, by

giving Jumbo c.30 days of credit.

1.4 Catalyst #3: May pay more dividends to get fatter ROEs Jumbo intends to pay out at least 30% of its annual earnings as dividends

in FY16-17. On our part, we think it can afford to pay more as by our

estimates, its ROE could be dragged down if it does not do so, given the

ample amount of FCF that it generates. We currently forecast ROE

declining from 30% in FY17E to 28.4% in FY18E assuming a 30% payout

ratio. However, if it pays out 50%, ROEs should remain stable at 31-32% in

FY17E-18E. If so, dividend yield should rise from <2% to 3% in FY16E and

closer to 4% by FY18E.

In this report, Jumbo refers to Jumbo Group the listed company, while JUMBO or JUMBO SEAFOOD refers to its seafood restaurant brand only.

January 3, 2016 6

Jumbo Group Ltd

2. Company Background

2.1 The seafood specialist Jumbo is one of Singapore’s leading multi-concept dining establishments.

Arguably, it has done more than its fair share to put Singapore on the world

culinary map, with its signature chilli and black pepper crabs. JUMBO SEAFOOD

outlets are popular with both locals and tourists. A quick search on

tripadvisor.com.sg for Singapore chilli crab throws up three of JUMBO SEAFOOD’s

five restaurants among the top 10. While there are no estimates from the

company, our eyeball estimates suggest a 50/50 local/tourist customer

composition for Jumbo. Anecdotally, it is usually the first stop on the dining trail

of tourists. We observe that its outlets remain crowded in fair and foul weather,

including the annual haze in Singapore.

Fig 3: Tripadvisor search rankings for Singapore chilli crab

Ranking Restaurant

1. Jumbo Seafood, East Coast Seafood Centre

2. Jumbo Seafood, Riverside Point

3. No Signboard Seafood, Geylang

4. Long Beach, East Coast Parkway

5. No Signboard Seafood, Esplanade

6. Jumbo Seafood, Dempsey

7. Long Beach, Dempsey

8. Mellben Seafood, Ang Mo Kio

9. Red House Seafood, Robertson Quay

10. Palm Beach Seafood, Fullerton

11. Chinatown Seafood, Trengganu Street

12. Eng Seng Restaurant, Joo Chiat

13. Forum Seafood, Boat Quay

14. Newton Hawker Centre

15. The Halia, Raffles Hotel

Source: www.tripadvisor.com.sg, accessed 23 Nov 2015

Fig 4: Jumbo’s award-winning chilli crab

Source: Company

The first JUMBO SEAFOOD outlet was opened in 1987 at the East Coast Seafood

Centre. This is still its largest, with a 1,250-pax capacity. It is also its most

profitable, by our reckoning, given its location. Jumbo opened four more outlets

in Singapore in 2002, 2004, 2006 and 2008. Its five restaurants in Singapore today

prepare more than 1.5m tonnes of crabs each day for hordes of hungry diners.

Average pax spending, according to a local foodie website, Hungrygowhere, is

SGD79. This is the highest in the group’s stable of five dining concepts.

Fig 5: JUMBO SEAFOOD restaurants in Singapore and China

No. of diners GFA (sf) Opened in

Singapore

- East Coast Seafood Centre 1,250 20,484 1987

- Riverside Point 280-300 5,447 2002

- The Riverwalk 280-300 5,965 2004

- NSRCC SAFRA @ Changi 280-300 7,309 2006

- Dempsey Hill 280-300 6,129 2008

China

- IAPM, Shanghai 250 12,239 2013

- Raffles City, Shanghai (new outlet) 200 7,368 Aug 2015

- IFC Mall, Shanghai (new outlet) 150 6,997 Jan 2016


January 3, 2016 7

Jumbo Group Ltd

2.2 Among the top 10 players locally Jumbo is among Singapore’s top 10 listed local restaurant groups by revenue.

Fig 6: Ranks third by revenue, second by profitability

FYE Restaurant revenue

only (SGD m)

EBITDA margin (%)

Auric Pacific Dec 14 138.6 Losses

BreadTalk Group Dec 14 130.7 15.3

Jumbo Group Sep 15 112.5 14.0

ABR Holdings Dec 14 102.5 10.4

Tung Lok Restaurants Mar 15 85.0 Losses

Sakae Holdings Dec 14 84.0 12.5

Select Group Dec 14 82.2 6.7-11.8

Japan Foods Mar 15 62.5 6.8

Soup Restaurant Group Dec 14 38.8 2.0

Neo Group Mar 15 19.2 3.9

JUMBO only reflects Singapore-based revenue, the rest may include overseas revenue

Source: Companies

While it is not the biggest by revenue, it is second only to BreadTalk in

profitability. Arguably, Jumbo has longer-term advantages as it owns most of its

brands while BreadTalk’s restaurant revenue stems mostly from Din Tai Fung, its

franchised brand from Taiwan. Franchise owners have been known to take back

successful territories from their franchisees. BreadTalk’s other major brand,

Carl’s Jr, is also franchised.

The other significant F&B player, Sakae Holdings, is the owner and operator of

the Sakae Sushi chain of conveyor-belt sushi joints. It business has lower margins

than Jumbo’s, though still fairly good, mainly because of a focus on a narrow

range of dining concepts.

2.3 Taking the chilli crab to the hairy crab kingdom Jumbo’s first stop in taking its chilli crab overseas was China in 2013, specifically

Shanghai where it now runs two JUMBO SEAFOOD restaurants with 200-250

seating capacity each. This is slightly smaller than the 250-300 for its Singapore

outlets, apart from its flagship East Coast restaurant. It opened its first outlet in

Nov 2013 and the second in Aug 2015. A third is slated for Jan 2016. Success has

come quickly. We understand that in a market saturated with local Chinese

restaurants, the Shanghainese have taken to the sweetish, piquant taste of

Jumbo’s seafood dishes. We believe Jumbo China’s 70:30 JV with BreadTalk

broke even in its first year of operations and was firmly in the black by the

second year. We project that China will account for over 30% of its revenue by

FY9/18, up from c.9% in FY9/15.

Fig 7: Revenue breakdown by dining concept…

Source: Maybank Kim Eng estimates

Fig 8: … and by market, projected


JUMBO SEAFOOD, 85.2%

Ng Ah Sio Bak Kut Teh, 3.5%

Chui Huay Lim Teochew

Restaurant, 6.0%

JPOT, 3.9%

JCafe, 0.5%

Retail & catering sales, 0.9%

91%

68%

9%

32%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY15 FY18E

Singapore China

January 3, 2016 8

Jumbo Group Ltd

2.4 Other hot & spicy brands that can also be exported Besides JUMBO SEAFOOD, which we estimate makes up c.85% of its revenue,

Jumbo has acquired or built a host of other dining concepts. We believe they can

also be exported to other countries, especially JPOT to China and Ng Ah Sio Bak

Kut Teh or Chui Huay Lim to countries with similar food and receptive

populations such as Malaysia or Thailand.

Ng Ah Sio Bak Kut Teh. Established in 1955, Jumbo acquired 51% of Ng Ah

Sio Investments in 2010, which operates an established bak kut teh

restaurant on Rangoon Road. This restaurant specialises in a Singapore

Teochew dish known as “white pepper” bak kut teh, a savoury pork-rib soup

prepared with toasted white pepper and garlic. Jumbo has proven to be a

supportive shareholder. Ng Ah Sio now has four outlets, up from just one

before its entry. After Jumbo came onboard in 2010, it added an Ng Ah Sio

food stall at the Rasapura Masters food court in Marina Bay Sands the same

year. This was followed by more outlets at a shophouse in Tanjong Katong

and on the premises of the Chui Huay Lim Club - a private Chinese clan

association - in 2012. Prices average SGD13-14 per pax, according to

Hungrygowhere.

JPOT hotpot restaurants. This is a fresh take on traditional hotpot dining

with a range of Singapore-style soup bases such as laksa (coconut-based

curry soup), silky porridge, tom yum (Thai spicy soup) and bak kut teh

(savoury pork broth). Jumbo owns and operates three JPOT outlets in

Singapore, with capacity for 160-210 diners each. Jumbo started this dining

concept in 2009 and added two more outlets in 2012 and 2014. Situated in

Vivocity, Tampines 1 and Parkway Parade, close to major population centres

and tourist attraction Sentosa, JPOT enjoys a locational advantage. Despite

higher rentals in these malls which are owned by REITs, our channel checks

suggest quick table turns and lean operations. For example, the outlet in

Vivocity can seat more than 200 but is staffed by only a service crew of 10.

Diners order through iPads and food is delivered within minutes. We

estimate at least three turns per table per night. The outlet is crowded even

on weekday nights. Prices average SGD35 per pax, according to

Hungrygowhere.

Fig 10: JPOT’s outlets

No. of diners Opened in Mall owner

Singapore

- Vivocity 160-210 2009 Mapletree Commercial Trust

- Tampines 1 160-210 2012 Asia Retail Mall Fund

- Parkway Parade 160-210 2014 Parkway Parade Partnership Ltd - 46%-owned by NTUC Income, 33% by PGGM Real Estate Fund

Source: Company, Maybank Kim Eng

Chui Huay Lim Teochew Cuisine. Serving authentic Teochew cuisine, this

restaurant is located at the Chui Huay Lim club, a private clan association

for Teochew businessmen. It serves an extensive menu of classic Teochew

dishes and offers Teochew porridge with more than 20 side dishes during

lunch. Seating capacity is 1,000 with nine private dining rooms and two

banquet halls. Average pax spending is SGD50, according to Hungrygowhere.

J Café. The latest dining concept launched in 2014, essentially on the

golfers’ terrace of the National Service Resort & Country Club, J Cafe serves

Singapore hawker classics. As it is this should have been a package deal with

the JUMBO SEAFOOD restaurant on the same premises, its rentals may be

lower.

Fig 9: Average spend per pax

SGD

JUMBO SEAFOOD 79

Singapore Seafood Republic 65

Chui Huay Lim Teochew Cuisine 50

JPOT 35

Yoshimaru Ramen Bar 16

Ng Ah Sio Bak Kut Teh 13-14

J Café n/a

Source: www.hungrygowhere.com

January 3, 2016 9

Jumbo Group Ltd

Finally, Jumbo manages and invests in two other dining concepts: the Singapore

Seafood Republic (SSR) chain of Singapore-style seafood cuisine in Singapore and

Japan, and Yoshimaru Ramen Bar in Holland Village. It operates these through

two JVs: SRPL for the SSR outlets in Japan plus Yoshimaru in Singapore; and SSR

Singapore for the SSR outlet in Singapore. At the moment, their profit

contributions are booked under associates and are not significant.

January 3, 2016 10

Jumbo Group Ltd

3. Industry Potential

3.1 Singapore on the global foodie’s trail… According to the Singapore Tourism Board (STB), shopping and F&B spending

makes up the bulk of domestic tourism revenue, at 21% and 10% respectively.

Singapore is widely regarded as a top eating capital in the Asia Pacific, with

ample food haunts and trails. In recent years, its restaurant scene has

blossomed, with the number of restaurants up from 2,041 in 2008 to 2,480 in

2013, according to SingStat.

There were 6,751 F&B establishments in Singapore in 2013 with restaurants

accounting for about a third. While restaurants have not grown as quickly as

other segments such as catering, they account for the largest chunk of revenue

and are growing the fastest, especially chain restaurants that can exploit size

advantages when negotiating for rental space in Singapore’s REIT-controlled

shopping malls.

The gastronomy bar has also been raised with the entry of renowned chefs like

Joël Robuchon (L’Atelier and Joël Robuchon Restaurant at Resorts World

Sentosa), Tetsuya Wakuda (Waku Ghin at MBS), Jamie Oliver (Jamie’s Italian at

Forum and Vivocity) and Gordon Ramsay (Bread Street Kitchen).1

Fig 11: Restaurants comprise 37% of F&B establishments…

Source: SingStat

Fig 12: …and 40% of operating receipts

Source: SingStat

Fig 13: They have been growing the fastest of all the F&B operations

Source: SingStat

1 source: www.stb.gov.sg/industries/dining-and-retail

January 3, 2016 11

Jumbo Group Ltd

3.2 …with crab at the top of the menu We believe the following trends in Singapore will be positive for Jumbo.

Locals are spending more on food and eating out more. Singapore

households are increasingly willing to spend on food due to a growing

number of multi-income households, consumer affluence and purchasing

power. According to Euromonitor, annual disposable income in Singapore has

risen at a CAGR of 3.8% from USD137.7b in 2011 to USD159.9b in 2015.

Consumer expenditure on food has increased by a faster CAGR of 4.4%, from

USD6.3b in 2011 to USD7.5b in 2015. Yet another favourable trend for Jumbo

is the rise in average monthly household expenditure on food, be it bought

from restaurants, hawker centres, food courts or other sources. This climbed

from SGD466 in 2003 to SGD764 in 2013 or from 13.9% of total household

expenditure to 16.2% over the 10 years.

Fig 14: Food bills rising faster than income…

Source: Euromonitor

Fig 15: … as households eat out more

Source: SingStat

Jumbo is a top-billed tourist hotspot. Based on STB’s surveys, 60% of the

visitors to Singapore partake of its local cuisine, attesting to the importance

of hawker food for tourism. Although it does not fall squarely into hawker

territory, we believe JUMBO SEAFOOD is well-positioned to take advantage

of this, as its outlets and cuisine are well-known to tourists. They are often

billed by both the government and tourism-related websites such as

Tripadvisor as one of the top places to try out local dishes for tourists. As a

local success story, Jumbo has benefited and should continue to benefit from

the government’s tourism promotion.

3.3 China bursting with potential Limited by the small domestic market, many home-grown F&B entrepreneurs in

Singapore have forayed overseas through JVs, franchises or corporate-owned

outlets. For many, their first stop tends to be China.

We believe Jumbo is on the right track with its expansion in China:

China offers twin attractions of size and growth, especially for full-

service restaurants. Chinese consumerisation and urbanisation are

stimulating demand for F&B services. Full-service restaurants (FSRs) such as

the two seafood outlets that Jumbo operations in Shanghai typically do well

in China. Such restaurants are expected to account for the largest share or

about 76% of China’s USD376b F&B industry in 2015, according to ACMR-

5,600

5,800

6,000

6,200

6,400

6,600

6,800

7,000

7,200

7,400

7,600

125,000

130,000

135,000

140,000

145,000

150,000

155,000

160,000

165,000

2011 2012 2013 2014 2015

(USD m)(USD m)

Annual disposable income Consumer expenditure on food

13.9%

15.5%

16.2%

12.5%

13.0%

13.5%

14.0%

14.5%

15.0%

15.5%

16.0%

16.5%

0

100

200

300

400

500

600

700

800

900

2003 2008 2013

(SGD)

Average monthly household expenditure for food serving services

As % of total average monthly household expenditure (RHS)

January 3, 2016 12

Jumbo Group Ltd

IBISWorld. The market has grown by an 11% CAGR since 2010.2 FSRs are

particularly relevant for big cities such as Shanghai, which now offer a

dizzying variety of international cuisines to expats and an increasingly

wealthy local middle class. Shanghai alone has more than 58,000 restaurants

touting 10 regional and 11 international cuisines, according to EURObiz, the

European Union Chamber of Commerce in China.3

Singapore-style cuisine works in China. According to Jumbo, Singapore’s

cuisine has been warmly embraced by the Shanghainese, as its sweetish,

lightly-spicy taste contrasts well with local flavours that are heavily spiced

eg Sichuan or Beijing cuisine. Moreover, Shanghainese are used to eating

crabs, since they have their own hairy-crab dishes. Unlike the hairy crab

which comes into season only in Oct-Dec, Jumbo’s chilli crab is available all

year round. Still, as management is cautious about whether its crab-based

seafood would work outside Shanghai, we believe further expansion for

JUMBO SEAFOOD will be limited to Shanghai for now. Outside Shanghai,

Jumbo is likely to try out its other dining concepts.

Positive hotpot precedent for Jumbo. One dining concept that has found

favour in China is hotpots. We believe its successful expansion in the past

reflects well on Jumbo. The Mongolian hotpot chain, Little Sheep Group

acquired by YUM! Brands, is China’s second-largest FSR chain after Pizza

Hut. YUM!’s 2011 acquisition underscored China’s multi-tiered nature of

demand in China. While demand for high-end, Western-style dining options

from global chains is still significant and growing, Euromonitor believes there

remains untapped demand for more familiar and affordable offerings from

chains such as Little Sheep, which combine more familiar dishes with a

clean, consistent chain experience that is highly appealing. Jumbo’s chain of

hotpot restaurants in Singapore under its JPOT brand with Singapore-

flavoured soups could be brought into play in China at some point, in our

view. Given its high margins, we would not be surprised if Jumbo rolls out

JPOT as its second exportable brand in China sometime in the future.

2 http://www.ibisworld.com/industry/china/full-service-restaurants.html 3 http://www.eurobiz.com.cn/food-thought-investing-chinas-fb-industry/

January 3, 2016 13

Jumbo Group Ltd

4. Growth Drivers

4.1 Expand further in China In China, Jumbo will operate three JUMBO SEAFOOD outlets by FY9/16E.

JUMBO@IAPM Mall was opened in Nov 2013, JUMBO@ Raffles City in Aug 2015,

and JUMBO@IFC Mall will be opened in Jan 2016. The IAPM and Raffles City

outlets have received good reviews on www.dianping.com, China’s equivalent of

www.hungrygowhere.com, a popular restaurant review website in Singapore.

Although it was opened just a few months ago, JUMBO@Raffles City has already

notched up almost 1,000 reviews vs >3,400 for JUMBO@IAPM. Both have been

rated a maximum of five stars by reviewers and ranked above 9/10 for taste,

ambience and service.

Fig 16: JUMBO IAPM - 5 stars/3,666 reviews

Source: www.dianping.com/shop/13784702, as at 30 Dec 2015

Fig 17: JUMBO@Raffles City – 5 stars/1,117 reviews

Source: www.dianping.com/shop/24996989, as at 30 Dec 2015

With just one outlet in operation, China accounted for c.6% of revenue in FY14

and c.9% of revenue in FY15. We think it could contribute 32% by FY18E, after

the opening of two more outlets in China for a total of five.

Fig 18: Jumbo Seafood restaurants in China so far

No. of diners GFA (sf) Opened in

- IAPM Mall, Shanghai 250 12,239 2013

- Raffles City, Shanghai 200 7,368 Aug 2015

- IFC Mall, Shanghai (opening in Jan 2016) 150 6,997 Jan 2016

Source: Company data

Jumbo intends to fully capitalise on its brand strength to expand further. It hopes

to open at least four more restaurants in Singapore and China in the next 24

months. It may offer new or existing dining concepts ranging from high-end fine

to casual dining. It intends to use SGD12m or 30% of its IPO proceeds for this.

January 3, 2016 14

Jumbo Group Ltd

4.2 Attractive locations secured in China Jumbo appears to have formed a strong working relationship with Sun Hung Kai

Properties (SHK), which owns both the IAPM Mall and IFC Mall. IAPM Mall houses

its first outlet opened in Nov 2013 while IFC Mall will soon host its third in Jan

2016. SHK (16 HK) is one of the largest property companies in Hong Kong, owned

by the Kwok brothers. It has a strong presence in China as an owner and

developer of residential, office and hotel properties.

IAPM Mall: Opened in Aug 2013, IAPM Mall is an upscale mall with a late-night

shopping concept. It is part of the integrated Shanghai ICC development, which

sits on Huaihai Middle Road in the busy commercial district of Puxi. The whole

development comprises two office towers, a shopping mall and deluxe

residences. With 1.3m sf of shopping GFA, the mall is fully leased out. In its

latest results presentation, SHK continued to report strong traffic growth and

tenant sales. This location is promising as it sits at the interchange of three

major metro lines.

Fig 19: IAPM Mall is at the interchange of Shanghai metro lines 1, 10 and 12, accessible by Shanxi Nan Lu station

Source: Shanghai ICC

IFC Mall: Mostly completed in 2010 but continuing to be upgraded, IFC Mall is

part of the Shanghai IFC integrated development located in the Pudong Lujiazui

Finance and Trade Zone. Jumbo’s third outlet will open here in Jan 2016. We are

equally optimistic on this high-end location on the famous Lujiazui roundabout,

near tourist attractions such as the Oriental Pearl Tower and Super Brand Mall.

The two towers are also home to the five-star Ritz Carlton Shanghai and the

Shanghai HQ of HSBC in China. It can be accessed via Lujiazui station on Metro

Line 2 and is just across the road from the bustling Super Brand Mall.

January 3, 2016 15

Jumbo Group Ltd

Fig 20: Shanghai IFC at the Lujiazui roundabout, near famous landmarks such as the Oriental Pearl Tower

Source: Shanghai IFC

Figure 21: Shanghai ICC in Puxi, site of IAPM Mall

Source: Sun Hung Kai Properties, FY14/15 annual results presentation

Figure 22: Shanghai IFC in Pudong, site of IFC Mall

Source: Sun Hung Kai Properties, FY14/15 annual results presentation

Raffles City: Jumbo’s second outlet was opened in Raffles City Shanghai in Aug

2015. Owned by Capitaland Mall Asia, this is a bustling mid-to-high-end mall

located at Xizang Middle Road in Shanghai’s downtown. The mall is close to

tourist haunts such as People’s Square, Nanjing Road Pedestrian Street, Shanghai

Museum and Shanghai Municipal Building with connectivity to People’s Square

subway station.

January 3, 2016 16

Jumbo Group Ltd

4.3 Part of the solution for China’s retail challenges Malls in China have had to evolve or devolve to deal with the country’s economic

slowdown. Retail sales, though still growing, have slowed, especially at the high-

end where big lux brands such as Prada, Chanel and LV have closed stores in the

past two years. Online shopping is having an adverse impact on bricks and mortar

retail, as is the import taxes that result in higher prices within China, leading

many to shop overseas or take advantage of daigou agents to provide overseas

buying services. The anti-corruption campaign by the government has also led to

a sharp halt in “gifting” luxury items in business deals.

In evolving to the changing landscape, the retail experience in China in becoming

less about shopping and buying products, but for leisure, entertainment, eating &

drinking and other social fulfilment concepts that bring differentiation to a highly

competitive retail environment. These include areas for children, unique food &

beverage options, live entertainment such as music or fashion shows, cinemas,

ice skating rinks, bowling alleys, etc. Malls have become destinations in

themselves, drawing in people to enjoy a day out and fill their leisure time with

activities that distract them from the daily grind.

Strong mall operators such as Sun Hung Kai Properties and Capitaland Mall Asia

are able to do this because they own the entire property and are able to provide

a unique shopping experience with a planned tenant mix. A key part of iAPM

Mall’s success is offering longer hours. The mall is open until 11pm for shops and

midnight for dinner and drinks. It has a wide range of entertainment, including a

6-screen IMAX cinema complex that accommodates more than 1,000 viewers.

Also, it has a successful social media loyalty program called VIC with over 1.7m

Weibo followers.

Where it applies to Jumbo, mall operators are setting aside 30-40% of the gross

floor area for food & beverage, up from 10-15% before 2007, according to real

estate consultancy CBRE. More F&B and entertainment space makes sense,

especially since Chinese malls are often integrated with residential projects. As

such, operators are also looking out for unique F&B options, such as what Jumbo

can offer. In terms of the broad numbers, this strategy appears to be working. A

report by the China Hotel Association said that F&B revenue in China rebounded

9.7% in 2014 after three years of slowdown.4

The trend to having more food-related activities as part of the high-end shopping

experience is in-line with what luxury brand companies are doing globally as

well. Food is a resilient business because restaurant meals are relatively

inexpensive pleasures compared to luxury shopping. According to Asia Retail

Partners, a HK retail consultancy, the next big wave in China is food as mainland

Chinese are eager to discover a new lifestyle. As a result, more and more lux

brands have entered the high-end food sector through acquisitions and restaurant

or café openings.

In 2014, LVMH acquired Milanese coffee house Pasticceria Confetteria Cova

Srl and took it to Beijing in 2015, with plans for Taiwan in 2016.5

In 2014, L Capital, LVMH’s private equity arm, bought Singapore’s Crystal

Jade, a chain of over 100 Chinese restaurants across Asia.6

In 2015, Gucci opened the world’s first Gucci Café in iAPM Mall in Shanghai.7

4 www.ibtimes.com/chinas-food-beverage-industry-rebounding-amid-anti-corruption-drive-1924543 5 http://www.straitstimes.com/lifestyle/food/the-pastry-war 6 http://www.lcapitalasia.com/portfolio_detail/crystal-jade 7 jingdaily.com/luxury-brands-break-into-food-business-to-reach-chinas-shoppers/#.VnC_10p97tQ

Fig 23: China retail sales growth slowing

Source: National Bureau of Statistics

January 3, 2016 17

Jumbo Group Ltd

4.4 Export other brands to the region Besides JUMBO and JPOT, we also believe that Jumbo can also export its other

food brands to other countries, especially Ng Ah Sio Bak Kut Teh or Chui Huay

Lim to countries with similar food and receptive populations such as Malaysia or

Thailand. While management has not made any mention of this in its growth

strategy yet, we believe it makes sense and could form the second phase of its

expansion plans in the region after China.

4.5 Acquisitions, JVs or strategic alliances Finally, Jumbo may expand its business in Singapore or overseas through

acquisitions, JVs or alliances with parties which can strengthen its market

position, add value to its business or help it expand. Examples are its partners in

the SSR JVs such as Tung Lok in Singapore or Maruha Restaurant Systems in Japan,

as well as Breadtalk which owns 30% of China’s JUMBO SEAFOOD outlets. Given

January 3, 2016 18

Jumbo Group Ltd

5. Barriers to Entry

5.1 Competitive with a clear path to growth Unlike Ngiam Tong Boon, a bartender widely credited to be the creator of the

Singapore Sling in the early 1900s, Jumbo is not the inventor of the chilli crab.

That honour goes to Mdm Cher Yam Tian of Roland Restaurant. In fact, its

signature dishes – chilli crab and black pepper crab – are widely available in

Singapore, varying only with the creativity of the chef.

Jumbo prices its signature crab dishes at a market-topping SGD78/kg.

Anecdotally, the market range is SGD45-80/kg. The lower-end prices can be

found in eating places such as non-air-conditioned coffee shops or industrial food

centres. Higher-end establishments such as JUMBO can charge more as they are

located in popular dining enclaves such as the East Coast Seafood Centre, Clarke

Quay or Dempsey Hill that also serve tourists. Despite similar dishes at lower

prices, we do not view the lower-end places as direct competitors of JUMBO.

For investors, however, the formulation, origin or price points of this dish are not

determinants for their investment, in our view. What matters should be the

following:

Great branding and marketing – Lower-end seafood places do not have the

branding, marketing reach or scale of Jumbo. Locals may claim that

Mellben’s or Roland’s crabs taste better, but they may equally choose to eat

at JUMBO whenever they want to be assured of consistency in taste and

ambience. For tourists, JUMBO is usually their dining destination of choice.

Arguably, locals also introduce their foreign friends to JUMBO for their first

“typical” taste of seafood in Singapore, on the reasonable assumption that

JUMBO is likely to leave a good impression with the tourists, not bad.

Growing footprint of outlets and brands – Now up to five brands, of which

only one is seafood-related, and 16 outlets in Singapore and China. The

growing footprint will serve Jumbo well in dealing with future competitive

pressures, in our view.

Well-tested systems and execution – This footprint is backed by a 10,000 sf

central kitchen and processes that allow it to reduce costs, maximise

revenue per staff, achieve consistency in food quality and tastes, and try out

more dining concepts with lower risk.

Clear expansion strategy – Jumbo intends to open four new outlets in the

next two years in Singapore and China. For its overseas story, it plans to

focus on China first, specifically Shanghai and JUMBO. Its first outlet in

China, opened in 2013, has been so successful that it will have three outlets

there by 2016.

5.2 Food quality & safety a key mantra Jumbo’s reputation and branding should work in its favour in China. As a

Singapore company, we believe Chinese consumers can be confident that the

quality of its ingredients, food preparation and food service are second to none.

This should appeal to the average Chinese consumer who is by now extremely

wary and demanding when it comes to food safety.

Jumbo only buys its ingredients from a list of approved suppliers and kitchen

staff must adhere to strict procedures in preparing and handling dishes.

According to management, even the crabs sold in its Shanghai outlets are

imported live from Singapore to ensure freshness and quality.

January 3, 2016 19

Jumbo Group Ltd

To further ensure high food-safety standards, Jumbo applies the HACCP safety

management system to all its operations. HACCP stands for Hazard Analysis and

Critical Control Point. While it is also used in non-food industries such as

chemicals and pharmaceuticals, its seven principles8 are just as applicable to the

food industry, namely:

(1) Identify hazards in each step, from purchasing, delivery and storage to

preparation, cooking and chilling

(2) Determine critical control points (CCPs) that ensure the control of the

hazards eg cooking raw meat thoroughly to kill pathogens

(3) Establish critical limits to facilitate the identification of a CCP when it is out

of control eg when cooking beef burgers, the centre of the burger must

reach a certain temperature to ensure the destruction of pathogens

(4) Establish a system to monitor control of the CCP

(5) Take corrective measures when monitoring indicates that a particular CCP is

not under control

(6) Establish procedures for confirmation that the HACCP system is working

effectively

(7) Establish documentation for all procedures

5.3 Expand central kitchen & IT to enhance scalability Jumbo’s central kitchens in Singapore and China prepare sauces and marinades,

process certain food ingredients and roll out semi-finished food products such as

marinated meats for its outlets. This way, quality and taste are controlled and

standardised. According to management, it does not need to station a master

chef at each outlet as the central kitchen is able to standardise the critical

ingredients and food preparations.

Jumbo’s 10,000 sf central kitchen in Singapore supplies to its local and China

outlets. Although located within the same building, it is separate from its

corporate offices and other kitchens. Jumbo intends to utilise SGD11.5m or 29%

of its IPO proceeds to bring together its operations under one roof in either

acquired or leased premises. It also wants to acquire new equipment and

machinery. In China, Jumbo has a small facility for marinating ingredients,

although its all-important pastes and spices are imported from Singapore to

protect its recipes. It also imports live crabs and certain critical herbs such as

lemongrass from Singapore. At some point, it may expand this operation.

Central kitchens are crucial to Jumbo’s operations as they can support scalability

as it expands its network. Their advantages are:

Ensuring food consistency. Before Jumbo opened its central kitchen in

2008, even its signature crab differs in taste from outlet to outlet. This is no

longer an issue as its central kitchen standardises the pastes and spices.

Jumbo has also found a way to reproduce its signature dishes easily, such

that even junior chefs can prepare the dish. This does away with the need to

employ expensive onsite master chefs.

Space and time savings. Laborious work such as washing and chopping are

done by kitchen helpers at its central kitchen. This leaves its chefs fresh to

work the whole night, to focus on food consistency. Furthermore, food

8 https://www.fsai.ie/food_businesses/haccp/principles_of_haccp.html

January 3, 2016 20

Jumbo Group Ltd

preparation starts at 2pm at its central kitchens instead of 5pm at each site,

saving on space and allowing for faster table turns.

Greater automation. Jumbo’s central kitchens use automation which

requires just 1-2 workers to produce sauces and spices for all its outlets.

Finally, Jumbo is big on using IT to improve efficiency and productivity. It was

among the first F&B establishments in Singapore to use integrated front-end

point-of-sale systems, whereby iPads and mobile POS terminals are used to take

orders that go straight to the kitchen. This leaves servers with more time to

attend to customers. Jumbo works with chope.com for online reservations for all

its outlets except Ng Ah Sio and J Café, which do not take reservations. Queuing

is also automated. Upon entering their mobile numbers, customers waiting for

their tables can leave and an SMS will alert them when their tables are ready.

A capable back-end IT system gives management timely information. We

understand that the implementation of an ERP system by early 2016 will give

management access to sales and cost data that are updated every five minutes.

This upgrade should allow management to respond faster to dining conditions.

For example, management will be aware of slow nights at a particular restaurant

in real time or slow-selling dishes. It can immediately instruct servers to respond

with special offers to diners.

January 3, 2016 21

Jumbo Group Ltd

6. Forecasts & Assumptions

6.1 Sales to grow by 16% CAGR, NP 13% in FY16E-18E We forecast sales to rise by 19%/15%/13% and core net profit to grow by

9%/11%/20% in FY16E/17E/18E. The revenue spike in FY16E is due mainly to the

addition of two JUMBO outlets in China. However, we expect FY16E NP growth to

be lower at 9% as we assumed that these two outlets will need a year to break

even. Thereafter however, NP growth should accelerate to 11% in FY17E and 20%

in FY18E as they start to positively contribute in the second year. While we

expect Jumbo to continue to open new outlets each year (eg one outlet per year

in China assumed with an additional outlet in Singapore assumed for FY17E), the

pace should be less frenetic and will allow the existing outlets to better cover

start-up costs of new outlets.

Fig 24: Revenue/net profit CAGRs of 16%/13% in FY15-18E…


Fig 25: … mainly from one new outlet per year in China


6.2 China to be the main growth driver China is expected to generate the biggest revenue and earnings growth for

Jumbo, justifying the addition of four outlets in FY15-FY18E, of which two have

been confirmed for FY15-FY16E. The early results have been overwhelmingly

positive for Jumbo. China accounted for 6% of group revenue in the year that its

first outlet opened in FY14. This number climbed to 9% by the second year in

FY15, all from just the one outlet in IAPM Mall. Profitability was achieved by the

end of the first year. The additional outlets we have forecasted are expected to

lift China’s revenue contributions to 32% by FY18E, with the biggest jump in

FY16E from two new outlets opened in Aug 2015 and Jan 2016 respectively.

Fig 26: China is expected to account for 32% of group revenue by FY18E…


Fig 27: …far outperforming Singapore’s single-digit growth


3%

9%

11%

20%

9%

19%

15%

13%

0%

5%

10%

15%

20%

25%

0

50,000

100,000

150,000

200,000

250,000


(SGD'000)

Revenue Core NP

Core NP growth (RHS) Revenue growth (RHS)

5 5 5 5

6 6

1

2

3

4

5

0

1

2

3

4

5

6

7

FY13 FY14 FY15 FY16E FY17E FY18E

Singapore JUMBO China JUMBO

100%94% 91%

79%73% 68%

6% 9%

21%27% 32%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Singapore China

6% 4% 5% 7%

60%

189%

53%

31%

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000


(SGD'000)

Singapore China

Singapore growth (RHS) China growth (RHS)

January 3, 2016 22

Jumbo Group Ltd

6.3 Optimistic on China expansion Based on our estimates, Jumbo’s first China seafood outlet at IAPM Mall should

have been profitable by the end of the first year. We believe its ROI is very high

as spending per pax in China tends to exceed Singapore’s with lower operating

costs. Its China prices are higher as crabs and sauces are imported from

Singapore but margins are better as other ingredients such as meat and

vegetables are sourced locally and sold at Singapore prices. Rental and labour

costs are also estimated to be lower than in Singapore due to preferential rental

rates from landlords and the employment of students/interns who are known to

be willing to trade lower wages for work experience.

At full operation, the investment payback time for an outlet could be as good as

three years with an ROI of 32%, assuming one table turn per night. Furthermore,

assuming Jumbo is able to capitalise on the positive impact it has made on the

local market so far by driving up table turns to an average of two per night, its

outlet payback could be as short as 1-2 years with an ROI of 86%, by our

estimates. Arguably, returns could be even better as we did not control for staff

and utility costs which are semi-variable for an F&B business. Just because

revenue doubles, staff and utility costs may not double along with it. Hence, we

believe our analysis is still conservative.

Fig 28: China ROI - our analysis of JUMBO IAPM’s performance

FY14 % of revenue 1 turn/night 2 turns/night YoY chg

Months of operation, opened in Nov 2013 10 12 12

Revenue (SGD'000) 6,529

12,000 24,000

Revenue (CNY'000), @ 4.50 CNY/SGD 29,381

54,000 108,000 100%

Revenue/table/month (CNY) 9,794

18,000 36,000

Revenue/table/night (CNY) 326

600 1,200

Table turns/night 1

1 2

Revenue/pax (CNY), based on 2 pax/table, 1 turn/night & dianping.com average spend/pax

163.2 300.0 300.0

Depreciation (assume 10 years) (1,125) 4% (1,125) (1,125)

Food costs (8,814) 30% (16,200) (32,400)

Rental costs (2,350) 8% (4,320) (4,320)

Gross profit (CNY'000) 17,091

32,355 70,155 117%

Gross margin 58%

60% 65% Staff costs (4,407) 15% (8,100) (16,200) EBIT 12,684

24,255 53,955 122%

EBIT margin 43%

45% 50% Utilities cost (2,938) 10% (5,400) (10,800) Other opex (5,876) 20% (10,800) (21,600) Pretax profit (CNY'000) 3,870

8,055 21,555 168%

Taxation, assume 25% statutory rate (967)

(2,014) (5,389) Minorities (30% owned by Breadtalk) (1,161)

(2,417) (6,467)

Net profit (CNY'000) 1,741

3,625 9,700 168%

Net margin 6%

7% 9%

Return on investment 15%

32% 86%

Payback period (years) 6.5

3.1 1.2

Estimated capex (CNY'000) 11,250

No. of tables 250


January 3, 2016 23

Jumbo Group Ltd

6.4 Singapore a sturdy mainstay Against the backdrop of a surging China, Singapore’s growth is expected to be

mid-to-high single digits, stoked largely by the performance of existing JUMBO

restaurants as well as the expansion of the JUMBO and JPOT network.

Singapore’s growth should mainly centre on diner growth and higher table spend,

especially at JUMBO outlets:

Improving diner volume. We are confident that Jumbo can continue to draw

customers to its flagship brands such as JUMBO SEAFOOD, JPOT or Ng Ah Sio

as they are established names serving popular cuisine. The trick is to

improve table turns. Jumbo has slick front-end service which includes online

reservations, an SMS-based queuing system and electronic order-taking.

When its new ERP system comes online, management can moreover access

sales and cost data that are updated every five minutes. This upgrade should

allow for a faster response to dining conditions.

Raising the price of crabs. According to Maybank Kim Eng’s in-house

foodies, Jumbo raised its crab prices twice last year from SGD68/kg to

SGD72/kg and further to SGD78/kg early this year. These hikes did not seem

to have been necessitated by costlier crabs as crab costs rose only a tame 6%

vs its FY15 revenue growth of 9%. Rather, prices were raised apparently to

offset higher rental costs and allow Jumbo to maintain its gross margins.

With full-year effects, we expect gross margins to improve in FY16.

For the organic growth of the existing outlets, we have predicated Singapore

growth on the following:

3% growth in average table spend for JUMBO (vs a more robust 5% for JUMBO

in China to account for the newness of the dining concept and brand)

1% growth in average table spend for Ng Ah Sio, Chui Huay Lim, JPOT and J

Café

To account for expansion of new outlets, our forecasts assumed the following:

The addition of one new 285-table JUMBO outlet, its sixth, in FY17E.

The addition of one new 50-table JPOT outlet, its fourth, in FY17E.

Obviously, this assumes that Jumbo is able to find suitable locations, especially

for JUMBO outlets which are usually found in tourist hotspots near rivers, the sea

or in foodie haunts such as Dempsey Hill. We do not preclude the possibility that

Jumbo could launch new dining concepts and the new outlets could involve new

brands instead of existing brands.

6.5 Why do we believe future expansion will favour JUMBO

and JPOT? Subject to finding the right locations at the right costs, we believe that

management is more likely to expand JPOT and JUMBO than its other dining

concepts. By our estimates, JUMBO SEAFOOD and JPOT command the best

margins, both gross and operating. These are followed by Ng Ah Sio Bak Kut Teh,

Chui Huay Lim Teochew Restaurant and J Café, in that order. Nevertheless, we

estimate that all its dining concepts are able to command gross margins of at

least 40% up to 60% for its flagship brands.

We believe food costs for JUMBO SEAFOOD and JPOT are among the lowest in the

group, given their central-kitchen modus operandi. JPOT’s ingredients are mainly

raw, with little to no preparation except for cutting and marinating. These can

be centralised. We also believe JUMBO’s food costs are below the group average

January 3, 2016 24

Jumbo Group Ltd

as key ingredients such as spices and pastes and processes such as cutting and

gutting can be centralised. However, JPOT’s rental costs are likely to be higher

than JUMBO’s as it operates only in shopping malls. That said, we believe that

food-cost savings give JPOT slightly higher gross margins than JUMBO.

We attribute Chui Huay Lim’s higher food costs as a proportion of revenue to the

type of food it serves, which requires more preparation and customisation,

especially since it operates two banquet halls and nine private dining rooms.

Fig 29: Jumbo’s estimated margins by dining concept

Revenue Food costs Rental costs Depreciation Gross margin Staff costs Operating margin

JUMBO SEAFOOD 100% 30% 10% 1% 59% 25% 34%

JPOT 100% 15% 20% 5% 60% 25% 35%

Ng Ah Sio Bak Kut Teh 100% 35% 10% 3% 52% 25% 27%

Chui Huay Lim Teochew Restaurant 100% 40% 8% 5% 47% 25% 22%

J Café 100% 40% 15% 5% 40% 25% 15%


6.6 Overall revenue assumptions Our revenue forecasts are mainly derived from the following:

The estimated number of tables for each brand across its outlets

The number of outlets for each brand across our forecast period considers

Jumbo’s known expansion plans and assumes certain expansion patterns, eg

one outlet per year for JUMBO SEAFOOD in China, as well as one new outlet

in Singapore for JUMBO and JPOT in FY17E. Jumbo could very well be more

aggressive in its expansion but for now, this is in line with its stated plan to

open four new outlets in the next 24 months

An estimated average table spend for each brand and an estimated p.a.

growth rate for each brand

Figure 30: Weighted average no. of tables

FYE Sep FY15 FY16E FY17E FY18E

Singapore JUMBO 1,615 1,615 1,650 1,710

China JUMBO 117 275 400 500

Ng Ah Sio Bak Kut Teh 200 200 200 200

Chui Huay Lim Teochew 100 100 100 100

JPOT 150 150 175 200

J Café 50 50 50 50

Total 2,232 2,390 2,575 2,760

Figure 31: No. of outlets

FYE Sep FY15 FY16E FY17E FY18E

Singapore JUMBO 5 5 6 6

China JUMBO 2 3 4 5

Ng Ah Sio Bak Kut Teh 4 4 4 4

Chui Huay Lim Teochew Restaurant 1 1 1 1

JPOT 3 3 4 4

J Café 1 1 1 1

Total no. of outlets 16 17 20 21

Additional no. of outlets 1 1 3 1

January 3, 2016 25

Jumbo Group Ltd

6.7 Margin trends should be stable We expect stable margin trends for Jumbo. Not all companies break out their

costs but for those that do, Jumbo compares quite favourably, particularly on

raw materials and staff costs.

Figure 32: Operating margins


Fig 33: Operating cost trends

Raw materials

Staff costs

Rental costs

As % of revenue FY13 FY14 FY15 FY13 FY14 FY15 FY13 FY14 FY15

Jumbo Group 38.9 38.0 36.9 27.7 27.1 28.3 8.1 7.9 8.4

Breadtalk Group - - - 26.6 26.9 27.3 - - -

Neo Group 31.0 29.6 38.3 30.1 32.4 30.2 6.2 6.8 5.7

Select Group - - - - - 34.8 9.7 7.9 6.7

Soup Restaurant Group 23.3 23.3 23.1 34.7 36.2 37.2 36.6 35.4 35.7

Tung Lok Restaurants - - - 33.7 31.5 33.6 16.2 15.1 15.9

Source: Companies

The key costs are:

Raw materials and consumables (36-37% of revenue) form the biggest

chunk of Jumbo’s costs, presumably because seafood is behind more than

70% of its revenue. Such costs have been declining in the last few years,

from 39% in FY13 to below 37% in FY15. As Jumbo becomes an ever bigger

buyer of seafood, it should be able to attract better pricing from its

suppliers. It mentioned in its IPO prospectus that it was able to obtain more

competitive pricing for seafood from another supplier between FY12 and

1H15. An expanded central kitchen should also help it optimise raw-material

usage.

Staff costs (27-28% of revenue) are the second biggest chunk. Jumbo has

consistently paid less than the industry for staff except BreadTalk. We

attribute this to its lean staffing and savvy use of IT at the front of the house

to maximise table turns. Stable staff turnover is another positive, keeping

staff costs in check. About 100 of its 700+ employees have been with Jumbo

for more than 10 years. We believe an ERP system early next year will be

another step in optimising staff costs, through real-time decisions on the

deployment of temporary workers, in response to nightly takings. We have

assumed staff costs will be higher in future now that it is a listed company.

Rentals (8% of revenue) should be more or less stable, though they may

creep slightly higher. Jumbo generally signs three-year leases which seem to

be evenly spaced out as its rental expenses have been increasing every year.

52%

52%

53%

53%

54%

54%

55%

55%

56%

56%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%


Gross margin (RHS) EBITDA margin

PBT margin Net margin

January 3, 2016 26

Jumbo Group Ltd

Its biggest Singapore outlet at the East Coast Seafood Centre is likely to be

leased from the National Parks Board at competitive rates since it has been

there for more than 20 years. Still, we would watch for any changes in

conditions by National Parks that may affect Jumbo. Recall that Red House

Seafood closed in March this year after its lease expired and National Parks

decided to take back the space for beachgoers.9 In China, Jumbo has been

able to secure competitive rates as it was invited by the landlords of the

malls it operates in.

Other operating expenses (10-11% of revenue) have been very stable as a

percentage of revenue in the past and we see no reason why this should

change. Other opex mainly includes cleaning costs, credit card costs,

marketing & advertising, repairs & maintenance, etc. Similarly with utilities

costs at c.3% of revenue.

6.8 Well-financed, capex not a concern given ample FCF We have little concern about Jumbo’s financing needs for its expansion.

Arguably, it does not need to list given the FCF that it generates. Past capex for

outlet expansion was low, and should remain low relative to cash flow. Even in

FY14 when it opened its first JUMBO outlet in China at IAPM Mall as well as a

third JPOT outlet and the first J Café in Singapore, capex was less than SGD4m.

This outlet is the group’s second-largest at 12,239 sf, after the 20,484 sf at

JUMBO East Coast. As such, we do not expect outlet capex to exceed SGD5m in

any year as additional outlets usually do not cost more than SGD2.5m each.

Capex per outlet in FY14-15 averaged SGD2.2m.

However, capex is expected to bulge above SGD15m in FY17-18E as we have

assumed that it may acquire or lease new premises to put its Singapore central

kitchen and other functions in one location. But even if this major capex is

brought forward, its strong FCF generation should stand Jumbo in good stead.

Other than that, we do not expect bulky capex for Jumbo, as a central kitchen in

Shanghai would not be needed until it has at least 5-6 outlets up and running.

This is not expected till FY19.

Fig 34: Capex schedule assumed

FYE Sep (SGD’000)

FY14 FY15 FY16E FY17E FY18E

Additional no. of outlets

3 1 1 3 1

Capex per outlet

- - 2,500.0 2,500.0 2,500.0

Capex on additional outlets

- - 2,500.0 7,500.0 2,500.0

Acquisition of premises for central kitchen

- - - 15,000.0 10,000.0

Total capex

3,558.5 5,469.0 2,500.0 22,500.0 12,500.0


Fig 35: No. of outlets & expansion schedule assumed

FYE Sep (SGD’000) FY14 FY15 FY16E FY17E FY18E

Singapore JUMBO 5 5 5 6 6

China JUMBO 1 2 3 4 5

Ng Ah Sio Bak Kut Teh 4 4 4 4 4

Chui Huay Lim Teochew Restaurant 1 1 1 1 1

JPOT 3 3 3 4 4

J Café 1 1 1 1 1

Total 15 16 17 20 21

Additional outlets 3 1 1 3 1


9 http://news.asiaone.com/news/singapore/long-time-east-coast-seafood-joint-go

January 3, 2016 27

Jumbo Group Ltd

It’s easy to see why Jumbo generates such solid FCF.

It’s a cash business. Customers pay by cash or credit cards and Jumbo is

paid by their banks and card issuers within three days of their transactions.

Jumbo gives no credit terms except for corporate customers such as travel

agencies which account for below 1% of its revenue.

Nothing kept in stock. Inventory is very low due to the perishable nature of

its food ingredients. Meat, seafood and vegetables are purchased every day

from wholesalers.

Suppliers finance its business. In contrast, suppliers give Jumbo c.30 days

of credit. Essentially, Jumbo’s business is being financed by its suppliers.

Fig 36: Cashflow analysis

FYE Sep (SGD’000) FY12 FY13 FY14 FY15 FY16E FY17E FY18E

CF from operations 10,096 12,834 16,296 14,874 25,766 24,914 29,696

Capex (5,628) (2,702) (3,558) (5,469) (2,500) (22,500) (12,500)

FCF 4,468 10,132 12,737 9,405 23,266 2,414 17,196

Receivable days 5.7 4.8 4.2 4.9 4.3 4.3 4.3

Inventory days 1.9 2.0 3.9 3.1 3.5 3.5 3.5

Payable days 27.5 31.3 26.7 25.3 30.0 30.0 30.0

Cash collection cycle (19.9) (24.5) (18.5) (17.3) (22.3) (22.3) (22.3)

Net cash 28,193 36,134 46,332 59,230 53,934 51,929 64,219

Source: Company, Maybank Kim Eng

6.9 Can afford to pay more dividends Jumbo intends to pay out at least 30% of its annual earnings as dividends in FY16-

17. On our part, we think it can afford to pay more as by our estimates, its ROE

could be dragged down if it does not do so.

Fig 37: ROE could fall in FY16-18E if Jumbo pays out only 30% of its earnings…


Fig 38: …but could be maintained if Jumbo pays out 50%


* ROE to spike in FY16 after the payment of SGD51.7m in special dividends to founding shareholders

January 3, 2016 28

Jumbo Group Ltd

Figure 39: P&L forecasts

FYE Sep (SGD'000) FY14 FY15 FY16E FY17E FY18E Comment

Revenue 112,404 122,795 146,704 168,793 191,226 Assumes 1 new JUMBO outlet in China pa, 1 new JUMBO and JPOT outlet in FY17E

Raw materials & consumables (42,697) (45,338) (52,813) (60,765) (68,841)

Changes in inventories 679 (182) 147 169 191

Rental expenses (8,846) (10,335) (12,763) (15,023) (17,402)

Cost of goods sold (50,864) (55,855) (65,430) (75,619) (86,052)

Gross profit 61,540 66,940 81,274 93,174 105,174

Employees benefits (30,443) (34,752) (41,811) (48,106) (54,499)

Utilities expenses (3,507) (3,631) (4,401) (5,064) (5,737)

Exceptionals 0 0 0 0 0

Other operating expenses (11,496) (13,146) (15,904) (17,723) (17,306)

Other operating income 2,533 3,059 2,934 3,038 2,868

EBITDA 18,627 18,470 22,092 25,319 30,501

Depreciation (3,127) (3,456) (4,108) (4,726) (5,354)

EBIT 15,500 15,014 17,985 20,593 25,146

Interest income 34 101 108 102 111

Interest expense (31) (32) (34) (41) (41)

Share of associates 88 57 68 82 98

Pretax profit 15,591 15,140 18,127 20,735 25,315

Taxation (1,813) (1,819) (2,175) (2,592) (3,291)

Minority interests (429) (570) (1,020) (1,557) (2,044)

Net profit 13,349 12,751 14,932 16,586 19,980

Core net profit 13,349 13,751 14,932 16,586 19,980 Core NP backs out SGD1m in listing costs in FY15

Growth/Per Share FY14 FY15 FY16E FY17E FY18E Comment

Revenue growth (%) 15% 9% 19% 15% 13%

EBITDA growth (%) 46% -1% 20% 15% 20%

PBT growth (%) 56% -3% 20% 14% 22%

NP growth (%) 40% -4% 17% 11% 20%

Core NP growth (%) 40% 3% 9% 11% 20%

FD core EPS growth (%) 40% -4% 17% 11% 20%

FD core EPS (SGD cts) 2.1 2.0 2.3 2.6 3.1

DPS (SGD cts) 0.0 8.1 0.7 0.8 0.9 8.1 SGD cts special dividend was paid to founding shareholders only. Disclosed in IPO prospectus

Margins/Tax FY14 FY15 FY16E FY17E FY18E Comment

Gross margin (%) 55% 55% 55% 55% 55%

EBITDA margin (%) 17% 15% 15% 15% 16%

EBIT margin (%) 14% 12% 12% 12% 13%

Pretax margin (%) 14% 12% 12% 12% 13%

Net margin (%) 12% 10% 10% 10% 10%

Core net margin (%) 12% 11% 10% 10% 10%

Tax rate (%) 12% 12% 12% 13% 13% Expected to rise on higher contributions from China, offset by initial startup losses

Major costs as % of revenue FY14 FY15 FY16E FY17E FY18E Comment

Raw materials & consumables 38.0% 36.9% 36.0% 36.0% 36.0% Declining in past few years. As Jumbo becomes an ever bigger buyer of seafood, it should be able to attract better pricing from suppliers

Employees benefits 27.1% 28.3% 28.5% 28.5% 28.5% Higher in future now that it is a listed company. This has already shown up in FY15 results

Other operating expenses 10.2% 10.7% 10.8% 10.5% 9.1% Very stable in the past and we see no reason why this should change. Mainly includes cleaning costs, credit card costs, marketing & advertising, repairs & maintenance, etc

Rental expenses 7.9% 8.4% 8.7% 8.9% 9.1% Should be more or less stable, though they may creep slightly higher with more new outlets opened in malls

Utilities expenses 3.1% 3.0% 3.0% 3.0% 3.0%

Depreciation 2.8% 2.8% 2.8% 2.8% 2.8%


January 3, 2016 29

Jumbo Group Ltd

Figure 40: Balance Sheet Forecasts


ASSETS

Inventory 1,216 1,034 1,407 1,619 1,834

Trade debtors 5,346 6,601 6,833 7,862 8,906

Other debtors 0 0 0 0 0

Investments - current 3,391 329 329 329 329

Other assets - current 200 0 0 0 0

Cash & bank balances 47,438 60,061 55,184 53,179 65,469 FY16E cash includes payment of SGD51.7m special dividend to founding shareholders and SGD37.5m in IPO proceeds, as IPO occurred only after Sep 2015

CURRENT ASSETS 57,591 68,025 63,753 62,988 76,538

Net fixed assets 11,966 13,981 12,373 30,147 37,293 Capex is expected to bulge in FY17-18E as we have assumed that it may acquire or lease new premises to put its Singapore central kitchen and other functions in one location

Intangible assets 782 782 782 782 782 Goodwill for acquisition of Ng Ah Sio

Investments 75 75 75 75 75

Associates 358 415 483 565 664 SSR Singapore, SSR Sentosa and SRPL

Deferred tax assets 0 0 0 0 0

Others 238 238 250 250 250

NON-CURRENT ASSETS 13,419 15,491 13,964 31,820 39,064

TOTAL ASSETS 71,010 83,516 77,716 94,808 115,602

LIABILITIES

Trade creditors 13,831 14,166 20,096 23,122 26,195

Other creditors 0 0 0 0 0

Tax payable 2,393 1,752 2,095 2,496 3,170

Others 1,569 1,477 1,650 1,650 1,650

Interest-bearing debt - current 230 182 250 250 250

CURRENT LIABILITIES 18,024 17,577 24,091 27,519 31,265

Interest-bearing debt - non-current 875 649 1,000 1,000 1,000

Deferred tax liabilities 93 93 100 100 100

Other liabilities - non-current 0 0 0 0 0

NON-CURRENT LIABILITIES 969 742 1,100 1,100 1,100

TOTAL LIABILITIES 18,992 18,319 25,191 28,619 32,365

SHAREHOLDERS EQUITY

Share capital 2,596 2,596 25,669 25,669 25,669

Treasury shares 0 0 0 0 0

Others 0 0 0 0 0

Retained earnings 44,396 53,995 17,227 29,334 44,338 Dropped in FY16E due to payment of SGD51.7m special dividend to founding shareholders. Disclosed in IPO prospectus and already paid

Other equity account/reserves 117 332 335 335 335

SHAREHOLDERS EQUITY 47,109 56,923 43,231 55,338 70,342

Minority Interests 4,909 8,274 9,294 10,851 12,895 Mainly from 70/30 JV with BreadTalk in China to open JUMBO SEAFOOD outlets

TOTAL LIABILITIES & SH EQUITY 71,010 83,516 77,716 94,808 115,602

Key Metrics FY14 FY15 FY16E FY17E FY18E Comment

Cash conversion cycle (days) (24) (19) (30) (30) (30) Expected to remain strong CF generative as AP far exceeds AR and Inventory

Inventory days 4 3 4 4 4

Receivable days 17 20 17 17 17

Payable days 45 42 50 50 50

Core ROE (%) 28.3% 24.2% 34.5% 30.0% 28.4%

Core ROA (%) 18.8% 16.5% 19.2% 17.5% 17.3%


January 3, 2016 30

Jumbo Group Ltd

Figure 41: Cashflow Forecasts


EBITDA 18,627 18,470 22,092 25,319 30,501

Change in working capital: (1,561) (1,136) 5,499 1,785 1,813

Inventory (679) 182 (373) (212) (215)

Trade debtors (736) (1,255) (232) (1,029) (1,045)

Trade creditors 185 335 5,930 3,026 3,073

Others (331) (397) 173 0 0

Cash generated from operations 17,066 17,334 27,591 27,104 32,314

Tax paid (770) (2,460) (1,825) (2,191) (2,618)

Net cash from operations 16,296 14,874 25,766 24,914 29,696

Net capex (3,532) (5,454) (2,500) (22,500) (12,500) Capex is expected to bulge in FY17-18E as we have assumed that it may acquire or lease new premises to put its Singapore central kitchen and other functions in one location

Interest income 34 101 108 102 111

Others (1,124) 3,464 (80) (82) (98)

Net cash from investments (4,622) (1,889) (2,472) (22,480) (12,487)

Interest paid (31) (32) (34) (41) (41)

Equity issuance & buybacks 0 0 23,073 0 0

Net change in debt (195) (275) 419 0 0

Dividends paid 0 0 (51,700) (4,480) (4,976) FY16E includes SGD51.7m special dividend to founding shareholders. Disclosed in IPO prospectus and already paid

Others (3,082) (198) 0 0 0

Net cash from financing (3,308) (505) (28,242) (4,521) (5,017)

Change in cash & fixed deposits 8,366 12,480 (4,948) (2,088) 12,192

Free cashflow 12,764 9,420 23,266 2,414 17,196


January 3, 2016 31

Jumbo Group Ltd

7. Valuation & Target Price

7.1 Undervalued to regional peers Jumbo is trading at 18x and 16x FY16E and FY17E EPS, at premiums to domestic

peers’ 16x and 11x averages. However, we believe local peers are not good

comparables as only two stocks – BreadTalk and Neo Group – offer sufficient

operating estimates that we can benchmark to. In contrast, regional peers

provide better comparisons given a bigger swathe of estimates and Jumbo’s own

China expansion plans. They include the likes of Café de Coral (341 HK) and

China Quanjude (002816 CN) and are trading at 22x and 21x on average. Despite

range-topping ROEs and margins, Jumbo trades at discounts to its regional peers.

By that yardstick, we believe it is undervalued, notwithstanding its current

premium to its IPO offer price of SGD0.25.

7.2 Deserving of a tasty premium We value Jumbo at SGD0.58 for c.40% upside potential. We used a blend of P/E

and DCF valuations to capture the full value of its expansion potential that could

take more than one year to pan out. This values Jumbo at 25x FY16E, 22x FY17E

and 19x FY18E EPS, which we think are reasonable as they are generally in line

with its regional peers. Our DCF valuation of SGD0.65 is conservative, as we have

assumed a higher-than-usual 10% market rate of return and 1.2x beta to account

for possibly higher risks associated with its aggressive China expansion. We also

employed five-year forecasts up until 2020 and assumed steady-state expansion

of 5% pa for the next five years until 2025.

Fig 42: Our blended DCF/PE TP for Jumbo is SGD0.58

Parameter

Risk Free Rate (%) 3.5%

Market Rate of Return (%) 10.0% Higher than our usual 8%, to account for growing exposure to China

Beta (x) 1.2 Higher than market as Jumbo is a newly-listed stock with an aggressive expansion plan

SIBOR 1-year 1.25%

Cost of Equity (%) 11.3%

Cost of Debt (%) 4.5%

WACC (%) 9.2%

Terminal Growth (%) 1.0%

Specific forecast period Steady-state period

FYE Sep 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E

EBITDA 22,092 25,319 30,501 33,630 35,073 36,827 38,668 40,601 42,631 44,763

Change in WC 5,499 1,785 1,813 1,802 972 500 500 500 500 500

Tax paid (1,825) (2,191) (2,618) (3,308) (3,774) (3,962) (4,161) (4,369) (4,587) (4,816)

Net cash from operations 25,766 24,914 29,696 32,124 32,271 33,364 35,007 36,733 38,544 40,447

Capex (2,500) (22,500) (12,500) (5,000) (2,500) (3,000) (3,000) (3,000) (3,000) (3,000)

Free cashflow to firm (FCFF) 23,266 2,414 17,196 27,124 29,771 30,364 32,007 33,733 35,544 37,447

PV of FCFF 23,266 2,209 14,410 20,806 20,904 19,517 18,833 18,169 17,525

Total PV of FCFF 155,639

Terminal Value 458,888

PV of Terminal Value 207,111

Total PV of FCFF 362,750

Less Debt (1,250)

Add Cash 55,184

Equity Value 416,684

Outstanding Shares (m) 641,333

DCF value per share 0.65

P/E TP based on 22x FY16E EPS 0.51

Blended TP 0.58


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Fig 43: Peer comparison

Close Mkt Cap P/E (x) EV/EBITDA (x) P/BV (x) Dividend yield (%) ROE (%) EPS Growth (%)

Company (Local) (USD'm) Act FY1 FY2 Act FY1 FY2 Act FY1 FY2 Act FY1 FY2 Act FY1 FY2 Act FY1 FY2

Jumbo Group Ltd. (Singapore) 0.42 190 19.6 18.0 16.2 11.4 9.8 8.6 4.7 6.2 4.9 0.0% 1.7% 1.8% 24.2% 34.5% 30.0% 3.0% 8.6% 11.1%

Singapore + Regional F&B groups 25.4 21.5 18.9 11.7 10.0 8.7 3.5 3.2 3.1 2.6% 2.9% 3.1% 14.1% 14.9% 15.6% 9.4% 19.6% 20.9%

Singapore-listed F&B groups 25.6 16.4 10.8 5.6 4.3 3.1 3.0 2.6 2.2 1.5% 1.5% 2.5% 10.0% 13.2% 16.2% -25.4% 57.9% 52.8%

Breadtalk Group 1.14 227 29.5 19.8 13.6 5.6 4.3 3.1 3.0 2.6 2.2 1.5% 1.5% 2.0% 10.0% 13.2% 16.2% -10.7% 49.1% 45.7%

ABR Holdings 0.73 104 - - - - - - - - - - - - - - - - - -

Neo Group 0.65 67 21.7 13.0 8.1 - - - - - - 1.5% 1.5% 3.1% - - - -40.0% 66.7% 60.0%

Auric Pacific Group 0.73 65 - - - - - - - - - - - - - - - - - -

Japan Foods 0.45 55 - - - - - - - - - - - - - - - - - -

Select Group 0.40 40 - - - - - - - - - - - - - - - - - -

Sakae Holdings 0.41 41 - - - - - - - - - - - - - - - - - -

Soup Restaurant 0.19 41 - - - - - - - - - - - - - - - - - -

Tung Lok Restaurants 0.11 21 - - - - - - - - - - - - - - - - - -

Regional F&B groups

25.4 22.4 20.5 12.4 10.6 9.3 3.5 3.2 3.2 2.8% 3.1% 3.2% 14.5% 15.0% 15.5% 15.5% 15.2% 13.2%

Jollibee Foods 219.00 4,978 41.2 35.4 29.7 20.8 17.3 15.2 8.1 7.3 6.7 1.0% 1.1% 1.4% 19.8% 20.6% 22.4% 5.1% 16.3% 19.1%

Minor International 36.00 4,390 32.0 27.5 23.8 20.6 17.6 15.5 4.9 4.4 3.8 1.0% 1.2% 1.5% 15.2% 15.8% 15.9% 2.3% 16.4% 15.6%

Cafe de Coral 22.75 1,712 23.7 23.2 20.3 13.7 12.2 10.9 3.6 3.4 3.3 3.1% 3.4% 3.8% 15.0% 14.7% 16.0% -8.6% 2.1% 14.3%

MK Restaurant 57.00 1,437 26.3 24.1 21.9 15.1 13.7 13.4 4.0 3.9 3.8 3.3% 3.5% 3.8% 15.4% 16.2% 17.2% -3.8% 9.0% 10.3%

China Quanjude 23.16 1,102 47.3 42.1 35.1 - - - - - - - - - - - - 19.5% 12.2% 20.0%

Gourmet Master 234.00 1,007 29.7 23.7 19.4 12.3 10.2 8.1 4.5 4.0 3.5 1.0% 1.5% 1.6% 15.1% 16.7% 18.2% 110.4% 25.7% 22.0%

Ajisen (China) 3.38 476 15.0 14.7 14.1 3.1 2.8 2.5 1.1 1.0 1.0 4.7% 4.7% 4.9% 7.1% 7.1% 7.2% -10.9% 2.2% 4.3%

Oishi Group 62.00 322 17.7 15.6 - - - - 2.9 2.7 - 3.2% 3.7% - 16.4% 17.2% - 25.0% 13.7% -

Tsui Wah Holdings 1.80 328 16.5 14.5 13.4 7.4 6.0 5.0 1.9 1.8 1.8 4.3% 4.7% 5.4% 11.6% 12.5% 13.4% -2.5% 13.8% 7.8%

Berjaya Food 2.33 204 23.8 17.7 14.4 11.0 8.6 7.2 2.1 2.1 2.0 2.4% 3.1% 3.9% 8.9% 11.7% 13.8% 42.0% 34.4% 22.5%

Oldtown 1.61 174 15.0 14.0 12.9 7.7 7.1 5.7 2.1 2.0 - 3.7% 4.1% 2.9% 13.8% 14.3% - 0.3% 7.2% 8.7%

La Kaffa International 84.00 72 16.9 16.0 - - - - 3.5 3.0 - - - - 20.6% 18.5% - 3.3% 5.8% -

Source: FactSet Estimates, Maybank Kim Eng, as at 30 Dec 2015

January 3, 2016 33

Jumbo Group Ltd

Figure 44: Singapore & regional F&B players mentioned in this report

Company Domestic Overseas Food retail brands

Singapore-listed F&B groups

Jumbo Group 91% 9% JUMBO, Ng Ah Sio Bak Kut Teh, JPOT, Singapore Seafood Republic

Breadtalk Group 52% 48% Diversified - BreakTalk, Food Republic, Toast Box, RamenPlay, Din Tai Fung, The Icing Room, Carl's Jr, Bread Society, Thye Moh Chan

ABR Holdings 86% 14% Mainly Western - Swensen's, Gloria Jean's Coffees, Hippopotamus Restaurant Grill, Yogen Fruz, Oishi Japanese Pizza

Neo Group 100% 0% Mainly Japanese - umisushi, issho izakaya, NANAMI UDON, LJJ Café

Auric Pacific Group 64% 36% Diversified - Delifrance, Food Junction, 1Market, Alfafa, Toast Junction, Eggs & Berries, MEDZS, Malone's American Café & Li Xuan Cantonese Cuisine (Shanghai), Lippo Chiuchow (HK)

Japan Foods 100% 0% Ramen specialist - Ajisen Ramen, Kazokutei, Botejyu, Fruit Paradise, Yonehachi, Menya Musashi, Osaka Ohsho, Menzo Butao, Kura, Keika, Hanamidori

Select Group 100% 0% Mainly catering but also owns & runs - Peach Garden, Lerk Thai, Pho Street, Griddy, Texas Chicken, Ipoh Lou Yau Bean Sprouts Chicken, Third Place

Sakae Holdings 64% 36% Mainly Japanese belt sushi - Sakae, Senjyu, Sachi, Kyo, Hei Sushi, Crepes & Cream

Soup Restaurant 100% 0% Sansui ginger chicken specialist under SOUP restaurants, also owns Pot Luck Heboh Zi Char and Café O

Tung Lok Restaurants 95% 5% Tung Lok Seafood, Tung Lok Signatures, Singapore Seafood Republic (partner with Jumbo), Lao Beijing, Dancing Crab, Tong Le Private Dining, Ruyi, Shin Yeh, TungLok Teahouse, Lokkee, etc

Regional F&B groups Listed in Description

Jollibee Foods Philippines Largest fast food chain in Philippines under Jollibee brand

Minor International Thailand Hotels and restaurants in Thailand, including investee brands such as The Pizza Company, The Coffee Club, Thai Express, BreadTalk, etc

Cafe de Coral Hong Kong Café de Coral quick service restaurants, Oliver's Super Sandwiches, The Spaghetti House, 360 Series, PizzaStage in HK

MK Restaurant Thailand Restaurant chain - MK Restaurants, MK Gold Restaurants, Yayoi Restaurant, Hakata Ramen, Miyazaki Teppanyaki, Na Siam Thai Restaurant, Le Siam Thai and Le Petit

China Quanjude China Quanjude Peking Roast Duck specialty restaurant chain in China

Gourmet Master Taiwan Café chain under 85°C Café brand in Taiwan, China, US, Australia and HK

Ajisen (China) Hong Kong Ajisen fast casual restaurant chain in HK and China

Oishi Group Thailand 9 Japanese restaurant brands under Oishi name

Tsui Wah Holdings Hong Kong Tsui Wah Restaurant chain in HK and China

Berjaya Food Malaysia Kenny Rogers Roasters, StarBucks, Jollibean in Malaysia

Oldtown Malaysia Old Town café chain in Malaysia, with own coffee manufacturing

La Kaffa International Taiwan F&B store chain under La Kaffa, Chatime and ZenQ brands through international franchise system


January 3, 2016 34

Jumbo Group Ltd

8. Risks & Concerns

8.1 Singapore tourism down but not a dealbreaker Singapore tourism has been hamstrung by weak source markets this year,

especially Europe and Asia where the resilient SGD vs EUR and other Asian

currencies has made Singapore more expensive. European and Asian visitors

made up 88% of total visitors in 2014. In addition, the annual recurring haze that

lasted an abnormal two months this year did not help. As JUMBO SEAFOOD’s

outlets are mostly al fresco, they were unlikely to have escaped unscathed.

During the height of the haze in 2013, takings from its Dempsey Hill outlet were

down by as much as 40%, according to press reports.

Tourism has been stagnant since 2013. The number of tourists visiting Singapore

peaked in 2013 and has plateaued at 15-15.5b annually since. STB is targeting

15.1-15.5m visitors in 2015; with 11.4m visitors in 9M15, this looks achievable. To

boost this number further, STB launched a SGD20m global marketing campaign in

June to promote Singapore as part of its SG50 celebrations. According to a

spokesperson, some of its programmes will extend into 2016. On the plus side,

although tourists dropped this year, the average tourist has been staying longer.

This should translate into opportunities for visiting more places in Singapore and

partaking in more of its local cuisine.

Fig 45: Monthly arrivals in Singapore…

Source: SingStat

Fig 46: … and their average length of stay

Source: CEIC, STB

On balance, we do not see stagnant tourism as a dealbreaker for Jumbo.

Customers eat at JUMBO because its outlets are destinations in themselves,

especially for tourists who may have heard about JUMBO even before their

arrival. This is borne out by our observation that its outlets are packed on most

nights, although they are found outside shopping malls. At least two are in the

out-of-the-way East Coast Seafood Centre and Dempsey Hill.

8.2 Must keep reputation intact at all costs Since its acquisition of Little Sheep in 2011, YUM!’s investment has proven to be

problematic, mainly due to unhygienic practices in the China hotpot industry that

have affected its reputation. These include the recycling of customers’ leftover

soups and instances of chicken, duck, rat or fox meat sold as lamb. YUM! has

since written down its original USD860m investment to USD100m. The obvious

takeaway is that providing and maintaining food quality is the No. 1 priority for

any F&B player in China. In recent years, China’s food supply chain has come

under the spotlight, ranging from the melamine-laced infant-milk scandal of 2008

to a gutter-oil scandal in 2010. As Jumbo sources some of its ingredients locally

for its China restaurants, including meat, non-crab seafood and vegetables,

(10.0)

(5.0)

0.0

5.0

10.0

15.0

20.0

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000(YoY %)

International visitor arrivals YoY (%)

January 3, 2016 35

Jumbo Group Ltd

management has to implement the same level of quality control that it does in

Singapore. If it fails, it risks tarnishing its brand in an important market.

8.3 Crab shortages Chilli crab is traditionally cooked using mud crabs - aka mangrove crabs - that are

readily found in Africa, Australia and many parts of Asia. However, Sri Lankan

crabs are highly prized for their larger size and sweeter meat than the others.

We believe there is no risk of shortages. Mud crabs are not an endangered species

and are prolific breeders within their short lifespan of 3-4 years. They are usually

mature in two years and each female can lay 2-4m eggs every time it breeds.

Interest in the farming of mud crabs is high due to their high demand and prices,

and their rapid growth rate in captivity.

Jumbo buys its crabs from Singapore wholesalers which import from diversified

sources. Generally, we understand that Singapore’s seafood wholesalers import

their crabs from three sources, depending on crab size: Sri Lanka (large crabs –

1.4-1.6kg), Indonesia (medium – 0.8-1.1kg) and Vietnam (small – 0.4-0.6kg).

8.4 Possible earnings volatility until new outlets mature While we expect Jumbo’s China outlets to break even within their first year of

opening in general, given their attractive locations and the success of Jumbo’s

first outlet, quarterly earnings could be volatile before its new outlets are

established enough to cover their initial operating costs.

January 3, 2016 36

Jumbo Group Ltd

Annex I: Listing Details

Jumbo was listed on Catalist, Singapore’s sponsor-supervised board, on 29 Oct

2015, at SGD0.25/share. It raised SGD37.5m after issuing 86.2m new shares to

institutional investors, 2m new shares to the public and 72.1m new shares to two

cornerstone investors, Orchid 1 Investments, a unit of Temasek Holdings, and Mr

Ron Sim, the CEO of listed lifestyle company, OSIM International.

Figure 47: Use of IPO proceeds

SGD’000 %

Establish new outlets, refurbish existing outlets 12,000 32

Acquire new premises, equipment and machinery 11,500 31

Working capital and general corporate purposes 14,000 37

Total 37,500 100

Source: Company

Annex II: Board of Directors/Senior Management

Mr Ang Kiam Meng, CEO and Executive Chairman

Mr Ang has been with Jumbo since 1993. He is responsible for overall

management, operations, strategic planning and business development. Prior to

joining Jumbo, Mr Ang worked with Singapore Technologies Electronics Limited

(formerly known as Singapore Electronic & Engineering Limited) from 1986 to

1993, as software engineer and product manager. He currently serves as

Chairman of the Commerce and Industry Committee and Council Member of the

Singapore Chinese Chamber of Commerce & Industry, as well as President Advisor

of the Management Committee of the Restaurant Association of Singapore. Mr

Ang has a Graduate Diploma in Business Administration from the Singapore

Institute of Management and a Bachelor of Arts (majoring in Computer Science)

from the University of Texas at Austin.

Mdm Jacqueline Tan Yong Chuan, Executive Director

Mdm Tan has been with Jumbo since 1990. She oversees the procurement and

purchasing function, merchandising and pricing, and monitors key performance

indicators such as customer engagement and reviews. Part of her portfolio is

overseeing business development and expansion. Prior to joining Jumbo, from

1985 to 1987 and from 1989 to 1990, Mdm Tan worked at Boulevard Hotel

Singapore, a member of the Goodwood Group, holding various positions including

Personnel Manager. From 1988 to 1989, Mdm Tan worked in the administrative

department of NHS Scotland. Mdm Tan has a Graduate Diploma in Personnel

Management from the Singapore Institute of Management and a Bachelor of

Business Administration from the National University of Singapore.

Mrs Christina Kong Chwee Huan, Executive Director

Mrs Kong oversees HR training and development, a role she has taken since

joining as Manager of Human Resources and Corporate Affairs in 2008. Mrs Kong

began her career as a purchasing executive in 1993. Between 1995 and 2000, she

provided educational services, before joining the Ministry of Education as a

teacher from 2001 to 2007. Mrs Kong is currently a member of the 5S Council of

the Restaurant Association of Singapore and the Tripartite Committee for Low-

wage Workers and Inclusive Growth, an initiative of the MOM. She is also a

Business Excellence Assessor with SPRING Singapore. Mrs Kong has a Postgraduate

Diploma in Education from the Nanyang Technological University and a Bachelor

of Science from the University of Birmingham (UK). She also has a Human

Resources Graduate Certification from the Singapore Management University.

January 3, 2016 37

Jumbo Group Ltd

Mr Tan Cher Liang, Lead Independent Director

Mr Tan has more than 40 years of experience in corporate audits, general

management and business advisory. In May 2000, he co-founded Boardroom

Limited, a company listed on the main board of SGX-ST. He was the Managing/

Finance Director of Boardroom Limited from 2000 to 2013, and is currently an

Advisor to Boardroom Limited. He was also the Managing Director of Boardroom

Business Solutions Pte Ltd and Boardroom Corporate & Advisory Services Pte Ltd,

from 1992 to 2013 and 1994 to 2013 respectively. Prior to 1992, he worked with

Ernst & Young Singapore and its affiliates, since Sep 1973. Mr Tan currently

serves as an Independent Director of Vibrant Group Limited and Kingsmen

Creatives Ltd, and Wilton Resources Corporation Limited. He holds directorships

in charitable organisations such as the D.S. Lee Foundation and Etonhouse

Community Fund Limited, and is also a Trustee of Kwan Im Thong Hood Cho

Temple. Mr. Tan was awarded the Public Service Medal in 1996. Mr. Tan was a

Fellow of the Association of Chartered Certified Accountants of the United

Kingdom from 1982 to 2014, and a member of the Institute of Singapore

Chartered Accountants from 1984 to 2014.

Mr Richard Tan Kheng Swee, Independent Director

Mr Tan has more than 11 years of experience in legal practice and is currently a

partner at Chris Chong & CT Ho Partnership, a Singapore law firm. His practice

includes advising and representing companies in a wide range of commercial

transactions such as asset acquisitions, IPOs and other fund-raising exercises,

M&As, corporate advisory and compliance involving listed and private companies.

Mr Tan previously practised law in various law firms in Singapore, including

RHTLaw Taylor Wessing LLP (Singapore Law Practice) where he was Partner and

Team Head, Corporate and Securities Practice, from 2013 to 2014. He has also

practised law in Mason Sier Turnbull, a mid-sized law firm in Victoria, Australia,

where he advised on corporate advisory, mergers and acquisitions, cross-border

refinancing and intellectual property. Mr. Tan currently serves as an Independent

Director of Mirach Energy Limited and Dapai International Holdings Co Limited.

Mr Tan has a Bachelor of Laws (Honours) from the National University of

Singapore and a Bachelor of Science (Honours) from the University of Melbourne,

Australia. He is an Advocate & Solicitor of the Supreme Court of Singapore, and

a Barrister & Solicitor of the Supreme Court of Victoria, Australia.

Dr Lim Boh Soon, Independent Director

Dr Lim has more than 25 years of experience in the banking and finance industry

in Asia. Dr Lim is currently a Director of Arise Asset Management Pte Ltd and

Isoquant Sdn Bhd. Prior to that, Dr Lim was the first non-Muslim CEO of Kuwait

Finance House (Singapore) Pte. Ltd. from 2007 to 2009, and the first foreign CEO

of Vietcombank Fund Management Company in Vietnam from 2005 to 2007. He

was a Group Corporate Director of Autron Corporation Limited from 2002 to 2006

(concurrently when he was CEO of Vietcombank Fund Management Company).

From 1996 to 1999, he served in various senior management positions with UBS

AG, including as a Partner, co-heading UBS Capital Asia Pacific. Dr Lim currently

serves as an Independent Director of CSE Global Limited and Auric Pacific Group

Limited, as well as AcrossAsia Limited and SMTrack Berhad. Dr Lim obtained a

Bachelor of Science with First Class Honours and a Doctor of Philosophy in

Mechanical Engineering from the University of Strathclyde, UK, in 1981 and 1985

respectively. He also has a Graduate Diploma in Marketing Management from the

Singapore Institute of Management, and a Diploma in Marketing from the

Chartered Institute of Management, UK. Dr Lim is a Fellow of the Singapore

Institute of Directors.

January 3, 2016 38

Jumbo Group Ltd

Mr Tay Peng Huat, CFO

Mr Tay is responsible for overall finance and accounting matters, including

implementation of internal controls, monitoring and reporting group financial

performances and overseeing the preparation of accounts and financial

statements. Mr Tay has over 27 years of experience in finance and accounting.

Prior to joining Jumbo, from 2002 to 2013, Mr Tay held the post of Chief Financial

Officer at Beyonics Technology Limited. Mr Tay began his career with Ernst &

Young Singapore in 1988 and was an Audit Manager when he left in 1996. From

1996 to 2000, he served as the Group Financial Controller of Electronic Resources

Limited (now known as Ingram Micro Asia Limited). Between 2000 and 2002, he

held various senior positions in finance and accounting, including Deputy General

Manager and Chief Financial Officer of p3.com Pte Ltd (a subsidiary of Pan Pacific

Public Company Ltd), Chief Financial Officer at Ezyhealth Asia Pacific Ltd (now

known as Wilmar International Ltd), and Finance Director of Synnex Information

Technologies Inc for its Asia Pacific operations. Mr Tay graduated with a Bachelor

of Accountancy from the National University of Singapore in 1988. He is a Fellow

Chartered Accountant of Singapore with the Institute of Singapore Chartered

Accountants.

January 3, 2016 39

Jumbo Group Ltd

Annex III: Shareholding Details

Fig 48: Shareholders of Jumbo

No. of shares % Comments

JBO 371,582,400 57.9 16 shareholders including Mr Ang Hon Nam, Mr Ang Kiam Meng, Jacqueline Tan Yong Chuan and Mrs Christina Kong Chwee Huan

Mr Tan Gee Jian 42,254,900 6.6 Co-founder of Jumbo

Orchid 1 Investments 40,000,000 6.2 Subsidiary of Temasek Holdings

Mr Ron Sim Chye Hock 32,100,000 5.0 CEO of OSIM International

Mr See Boon Huat 28,169,800 4.4 Co-founder of Jumbo

Mr Koh Ah Say @ See Boon Chye 14,084,700 2.2 Brother of Mr See Boon Huat

Other employees 7,838,000 1.2 Comprising 16 key employees of Jumbo

Palm Beach Seafood Restaurant 12,545,200 2.0 Ex-JV partner for JUMBO Riverside and JUMBO Riverwalk

Mr Ng Kok Kiang 465,500 0.1 Investor in Chui Huay Lim Teochew Cuisine

Mdm Chan Hwee Eng 465,500 0.1 Investor in Chui Huay Lim Teochew Cuisine

NSH Holdings 3,594,000 0.6 50% owned by Mr Ng Siak Hai, co-founder of Jumbo and son of Ng Mui Song, founder of Ng Ah Sio Bak Kut Teh

Public shareholders 88,233,000 13.8

Total 641,333,000 100.0

Source: Company

Fig 49: Shareholders of JBO

Stake Comments

Mr Ang Hon Nam 28.9% Co-founder of Jumbo. Father of Mr Ang Kiam Meng, Mrs Christina Kong Chwee Huan, Mdm Wendy Ang Chui Yong, Mr Ang Kiam Lian and Ms Ang Cheau Hoon

Mr Ang Kiam Meng 13.1% Current CEO and Executive Chairman of Jumbo. Husband of Mdm Jacqueline Tan Yong Chuan

Mr Ng Siak Hai 10.7% Co-founder of Jumbo and son of Ng Mui Song, founder of Ng Ah Sio Bak Kut Teh

Mr Lee Ching Poo 7.6% No information

Mr Ng Nam Soon 7.6% Brother of Mr Ang Hon Nam

Mr Ng Nam Huat 7.6% Brother of Mr Ang Hon Nam

Mdm Nyeo Sai Joo 6.2% Spouse of Mr Ang Hon Nam

Mdm Tan Yong Chuan, Jacqueline 4.0% Spouse of Mr Ang Kiam Meng

Mr Eng Nam Heng 3.1% Brother of Mr Ang Hon Nam

Ms Ng Cheau Lee 3.1% Daughter of Mr Ng Nam Soon

Mr Ng Kiam Chiaw (Huang Jianchao) 3.1% Son of Mr Ng Nam Huat

Mdm Goh Guay Ngoh, Shirley 3.1% Mother of Mr Ang Hon Nam's son

Mrs Christina Kong Chwee Huan 1.7% Sister of Mr Ang Kiam Meng

Mdm Wendy Ang Chui Yong 0.1% Sister of Mr Ang Kiam Meng

Mr Ang Kiam Lian 0.1% Brother of Mr Ang Kiam Meng

Ms Ang Cheau Hoon 1 share Sister of Mr Ang Kiam Meng

Source: Company

Fig 50: Moratorium

Shareholder With regard to Duration of moratorium

JBO Shares in Jumbo 24 months from 29 Oct 2015

Mr Ang Hon Nam, Mr Ang Kiam Meng, Jacqueline Tan Yong Chuan and Mrs Christina Kong Chwee Huan

Shares in JBO 24 months from 29 Oct 2015

NSH Holdings, Other employees, Mr Koh Ah Say @ See Boon Chye, Mr See Boon Huat, Mr Tan Gee Jian

Shares in Jumbo 100% within 6 months from 29 Oct 2015, 50% for next 6 mths

Shareholders of NSH Holdings Shares in NSH Holdings 12 months from 29 Oct 2015

Orchid 1 Investments, Mr Ron Sim Shares in Jumbo 6 months from 29 Oct 2015

Source: Company

January 3, 2016 40

Jumbo Group Ltd

FYE 30 Sep FY14A FY15A FY16E FY17E FY18E

Key Metrics

P/E (reported) (x) 20.4 21.4 18.3 16.4 13.6

Core P/E (x) 20.4 19.8 18.3 16.4 13.6

P/BV (x) 5.8 4.8 6.3 4.9 3.9

P/NTA (x) 5.9 4.9 6.4 5.0 3.9

Net dividend yield (%) 0.0 19.0 1.6 1.8 2.2

FCF yield (%) 4.7 3.5 8.5 0.9 6.3

EV/EBITDA (x) na na 10.3 9.1 7.3

EV/EBIT (x) na na 12.7 11.2 8.8

INCOME STATEMENT (SGD m)

Revenue 112.4 122.8 146.7 168.8 191.2

Gross profit 61.5 66.9 81.3 93.2 105.2

EBITDA 18.6 18.5 22.1 25.3 30.5

Depreciation (3.1) (3.5) (4.1) (4.7) (5.4)

Amortisation 0.0 0.0 0.0 0.0 0.0

EBIT 15.5 15.0 18.0 20.6 25.1

Net interest income /(exp) 0.0 0.1 0.1 0.1 0.1

Associates & JV 0.1 0.1 0.1 0.1 0.1

Exceptionals 0.0 0.0 0.0 0.0 0.0

Other pretax income 0.0 0.0 0.0 0.0 0.0

Pretax profit 15.6 15.1 18.1 20.7 25.3

Income tax (1.8) (1.8) (2.2) (2.6) (3.3)

Minorities (0.4) (0.6) (1.0) (1.6) (2.0)

Perpetual securities 0.0 0.0 0.0 0.0 0.0

Discontinued operations 0.0 0.0 0.0 0.0 0.0

Reported net profit 13.3 12.8 14.9 16.6 20.0

Core net profit 13.3 13.8 14.9 16.6 20.0

BALANCE SHEET (SGD m)

Cash & Short Term Investments 47.4 60.1 55.2 53.2 65.5

Accounts receivable 5.3 6.6 6.8 7.9 8.9

Inventory 1.2 1.0 1.4 1.6 1.8

Property, Plant & Equip (net) 12.0 14.0 12.4 30.1 37.3

Intangible assets 0.8 0.8 0.8 0.8 0.8

Investment in Associates & JVs 0.4 0.4 0.5 0.6 0.7

Other assets 3.9 0.6 0.7 0.7 0.7

Total assets 71.0 83.5 77.7 94.8 115.6

ST interest bearing debt 0.2 0.2 0.3 0.3 0.3

Accounts payable 13.8 14.2 20.1 23.1 26.2

LT interest bearing debt 0.9 0.6 1.0 1.0 1.0

Other liabilities 4.0 3.0 4.0 4.0 5.0

Total Liabilities 19.0 18.3 25.2 28.6 32.4

Shareholders Equity 47.1 56.9 43.2 55.3 70.3

Minority Interest 4.9 8.3 9.3 10.9 12.9

Total shareholder equity 52.0 65.2 52.5 66.2 83.2


Total liabilities and equity 71.0 83.5 77.7 94.8 115.6

CASH FLOW (SGD m)

Pretax profit 15.6 15.1 18.1 20.7 25.3

Depreciation & amortisation 3.1 3.5 4.1 4.7 5.4

Adj net interest (income)/exp 0.0 0.1 0.1 0.1 0.1

Change in working capital (1.6) (1.1) 5.5 1.8 1.8

Cash taxes paid (0.8) (2.5) (1.8) (2.2) (2.6)

Other operating cash flow 0.0 0.0 0.0 0.0 0.0

Cash flow from operations 16.3 14.9 25.8 24.9 29.7

Capex (3.6) (5.5) (2.5) (22.5) (12.5)

Free cash flow 12.7 9.4 23.3 2.4 17.2

Dividends paid 0.0 0.0 (51.7) (4.5) (5.0)

Equity raised / (purchased) 0.0 0.0 23.1 0.0 0.0


Change in Debt (0.2) (0.3) 0.4 0.0 0.0

Perpetual securities distribution 0.0 0.0 0.0 0.0 0.0

Other invest/financing cash flow (4.2) 3.3 (0.0) (0.0) (0.0)

Effect of exch rate changes 1.6 0.1 0.1 0.1 0.1

Net cash flow 10.0 12.6 (4.9) (2.0) 12.3

January 3, 2016 41

Jumbo Group Ltd

FYE 30 Sep FY14A FY15A FY16E FY17E FY18E

Key Ratios

Growth ratios (%)

Revenue growth 15.1 9.2 19.5 15.1 13.3

EBITDA growth 46.5 (0.8) 19.6 14.6 20.5

EBIT growth 55.7 (3.1) 19.8 14.5 22.1

Pretax growth 55.6 (2.9) 19.7 14.4 22.1

Reported net profit growth 39.8 (4.5) 17.1 11.1 20.5

Core net profit growth 39.8 3.0 8.6 11.1 20.5

Profitability ratios (%)

EBITDA margin 16.6 15.0 15.1 15.0 16.0

EBIT margin 13.8 12.2 12.3 12.2 13.1

Pretax profit margin 13.9 12.3 12.4 12.3 13.2

Payout ratio 0.0 nm 30.0 30.0 30.0

DuPont analysis

Net profit margin (%) 11.9 10.4 10.2 9.8 10.4

Revenue/Assets (x) 1.6 1.5 1.9 1.8 1.7

Assets/Equity (x) 1.5 1.5 1.8 1.7 1.6

ROAE (%) 31.8 26.4 29.8 33.7 31.8

ROAA (%) 20.8 17.8 18.5 19.2 19.0

Liquidity & Efficiency

Cash conversion cycle (75.1) (65.5) (71.1) (80.0) (80.2)

Days receivable outstanding 15.9 17.5 16.5 15.7 15.8

Days inventory outstanding 6.2 7.3 6.7 7.2 7.2

Days payables outstanding 97.2 90.2 94.3 102.9 103.2

Dividend cover (x) nm 0.2 3.3 3.3 3.3

Current ratio (x) 3.2 3.9 2.6 2.3 2.4

Leverage & Expense Analysis

Asset/Liability (x) 3.7 4.6 3.1 3.3 3.6

Net debt/equity (%) net cash net cash net cash net cash net cash

Net interest cover (x) na na na na na

Debt/EBITDA (x) 0.1 0.0 0.1 0.0 0.0

Capex/revenue (%) 3.2 4.5 1.7 13.3 6.5

Net debt/ (net cash) (46.3) (59.2) (53.9) (51.9) (64.2)

Source: Company; Maybank

January 3, 2016 42

Jumbo Group Ltd

Research Offices

REGIONAL

Sadiq CURRIMBHOY

Regional Head, Research & Economics

(65) 6231 5836 [email protected]

WONG Chew Hann, CA

Regional Head of Institutional Research


ONG Seng Yeow

Regional Head of Retail Research


TAN Sin Mui

Director of Research


ECONOMICS

Suhaimi ILIAS Chief Economist Singapore | Malaysia (603) 2297 8682 [email protected]

Luz LORENZO Philippines

(63) 2 849 8836 [email protected]

Tim LEELAHAPHAN Thailand (66) 2658 6300 ext 1420 [email protected]

JUNIMAN Chief Economist, BII Indonesia (62) 21 29228888 ext 29682

[email protected]

STRATEGY

Sadiq CURRIMBHOY

Global Strategist


Willie CHAN

Hong Kong / Regional


MALAYSIA

WONG Chew Hann, CA Head of Research (603) 2297 8686 [email protected] • Strategy

Desmond CH’NG, ACA (603) 2297 8680 [email protected] • Banking & Finance

LIAW Thong Jung (603) 2297 8688 [email protected] • Oil & Gas Services- Regional

ONG Chee Ting, CA (603) 2297 8678 [email protected] • Plantations - Regional

Mohshin AZIZ (603) 2297 8692 [email protected] • Aviation - Regional • Petrochem

YIN Shao Yang, CPA (603) 2297 8916 [email protected] • Gaming – Regional • Media

TAN Chi Wei, CFA (603) 2297 8690 [email protected] • Power • Telcos

WONG Wei Sum, CFA (603) 2297 8679 [email protected] • Property

LEE Yen Ling (603) 2297 8691 [email protected] • Building Materials • Glove • Ports • Shipping

CHAI Li Shin, CFA (603) 2297 8684 [email protected] • Plantation • Construction & Infrastructure

Ivan YAP (603) 2297 8612 [email protected] • Automotive • Semiconductor • Technology

Kevin WONG (603) 2082 6824 [email protected] • REITs • Consumer Discretionary

LIEW Wei Han

(603) 2297 8676 [email protected] • Consumer Staples

LEE Cheng Hooi Regional Chartist (603) 2297 8694 [email protected]

Tee Sze Chiah Head of Retail Research (603) 2297 6858 [email protected]

Cheah Chong Ling (603) 2297 8767 [email protected]

HONG KONG / CHINA

Howard WONG Head of Research (852) 2268 0648 [email protected] • Oil & Gas - Regional

Benjamin HO (852) 2268 0632 [email protected] • Consumer & Auto

Jacqueline KO, CFA (852) 2268 0633 [email protected] • Consumer Staples & Durables

Ka Leong LO, CFA (852) 2268 0630 [email protected] • Consumer Discretionary & Auto

Mitchell KIM (852) 2268 0634 [email protected] • Internet & Telcos

Osbert TANG, CFA (86) 21 5096 8370 [email protected] • Transport & Industrials

Stefan CHANG, CFA (852) 2268 0675 [email protected] • Technology

Steven ST CHAN (852) 2268 0645 [email protected] • Banking & Financials - Regional

Warren LAU (852) 2268 0644 [email protected] • Technology – Regional

INDIA

Jigar SHAH Head of Research


• Oil & Gas • Automobile • Cement

Anubhav GUPTA


• Metal & Mining • Capital Goods • Property

Vishal MODI


• Banking & Financials

Abhijeet KUNDU


• Consumer

Neerav DALAL


• Software Technology • Telcos

SINGAPORE

Gregory YAP (65) 6231 5848 [email protected] • SMID Caps • Technology & Manufacturing • Telcos

YEAK Chee Keong, CFA (65) 6231 5842 [email protected] • Offshore & Marine

Derrick HENG, CFA (65) 6231 5843 [email protected] • Transport • Property • REITs (Office)

Joshua TAN (65) 6231 5850 [email protected] • REITs (Retail, Industrial)

John CHEONG, CFA (65) 6231 5845 [email protected] • Small & Mid Caps • Healthcare

TRUONG Thanh Hang (65) 6231 5847 [email protected] • Small & Mid Caps

INDONESIA

Isnaputra ISKANDAR Head of Research (62) 21 2557 1129 [email protected] • Strategy • Metals & Mining • Cement

Rahmi MARINA (62) 21 2557 1128 [email protected] • Banking & Finance

Aurellia SETIABUDI (62) 21 2953 0785 [email protected] • Property

Pandu ANUGRAH (62) 21 2557 1137 [email protected] • Infra • Construction • Transport• Telcos

Janni ASMAN (62) 21 2953 0784 [email protected] • Cigarette • Healthcare • Retail

Adhi TASMIN (62) 21 2557 1209 [email protected] • Plantations

Anthony LUKMAWIJAYA (62) 21 2557 1126 [email protected] • Aviation

PHILIPPINES

Luz LORENZO Head of Research (63) 2 849 8836 [email protected] • Strategy • Utilities • Conglomerates • Telcos

Lovell SARREAL (63) 2 849 8841 [email protected] • Consumer • Media • Cement

Rommel RODRIGO (63) 2 849 8839 [email protected] • Conglomerates • Property • Gaming • Ports/ Logistics

Katherine TAN (63) 2 849 8843 [email protected] • Banks • Construction

Michael BENGSON (63) 2 849 8840 [email protected] • Conglomerates

Jaclyn JIMENEZ (63) 2 849 8842 [email protected] • Consumer

Arabelle MAGHIRANG (63) 2 849 8838 [email protected] • Banks

THAILAND

Maria LAPIZ Head of Institutional Research Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 [email protected] • Consumer • Materials • Ind. Estates

Sittichai DUANGRATTANACHAYA (66) 2658 6300 ext 1393 [email protected]

• Services Sector • Transport

Yupapan POLPORNPRASERT (66) 2658 6300 ext 1395 [email protected] • Oil & Gas

Sukit UDOMSIRIKUL Head of Retail Research (66) 2658 6300 ext 5090 [email protected]

Mayuree CHOWVIKRAN (66) 2658 6300 ext 1440 [email protected] • Strategy

Padon VANNARAT (66) 2658 6300 ext 1450 [email protected] • Strategy

Surachai PRAMUALCHAROENKIT (66) 2658 6300 ext 1470 [email protected] • Auto • Conmat • Contractor • Steel

Suttatip PEERASUB (66) 2658 6300 ext 1430 [email protected] • Media • Commerce

Sutthichai KUMWORACHAI (66) 2658 6300 ext 1400 [email protected] • Energy • Petrochem

Termporn TANTIVIVAT (66) 2658 6300 ext 1520 [email protected] • Property

Jaroonpan WATTANAWONG (66) 2658 6300 ext 1404 [email protected] • Transportation • Small cap

VIETNAM

LE Hong Lien, ACCA Head of Institutional Research (84) 8 44 555 888 x 8181 [email protected] • Strategy • Consumer • Diversified • Utilities

THAI Quang Trung, CFA, Deputy Manager, Institutional Research (84) 8 44 555 888 x 8180 [email protected] • Real Estate • Construction • Materials

Le Nguyen Nhat Chuyen (84) 8 44 555 888 x 8082 [email protected] • Oil & Gas

NGUYEN Thi Ngan Tuyen, Head of Retail Research (84) 8 44 555 888 x 8081 [email protected] • Food & Beverage • Oil&Gas • Banking

TRINH Thi Ngoc Diep (84) 4 44 555 888 x 8208 [email protected] • Technology • Utilities • Construction

PHAM Nhat Bich (84) 8 44 555 888 x 8083 [email protected] • Consumer • Manufacturing • Fishery

NGUYEN Thi Sony Tra Mi (84) 8 44 555 888 x 8084 [email protected] • Port operation • Pharmaceutical • Food & Beverage

TRUONG Quang Binh (84) 4 44 555 888 x 8087 [email protected] • Rubber plantation • Tyres and Tubes • Oil&Gas

January 3, 2016 43

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APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES

DISCLAIMERS

This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdiction’s stock exchange in the equity analysis. Accordingly, investors’ returns may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report.

The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad, its subsidiary and affiliates (collectively, “MKE”) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees (collectively, “Representatives”) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice.

This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events.

MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solicit business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. MKE may, to the extent permitted by law, act upon or use the information presented herein, or the research or analysis on which they are based, before the material is published. One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report.

This report is prepared for the use of MKE’s clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for the actions of third parties in this respect.

This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. This report is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this report.

Malaysia

Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis.

Singapore

This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (“Maybank KERPL”) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law.

Thailand

The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. Maybank Kim Eng Securities (Thailand) Public Company Limited (“MBKET”) does not confirm nor certify the accuracy of such survey result.

Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of MBKET. MBKET accepts no liability whatsoever for the actions of third parties in this respect.

US

This research report prepared by MKE is distributed in the United States (“US”) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (“Maybank KESUSA”), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US. This report is not directed at you if MKE is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investments to you under relevant legislation and regulations.

UK

This document is being distributed by Maybank Kim Eng Securities (London) Ltd (“Maybank KESL”) which is authorized and regulated, by the Financial Services Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.

January 3, 2016 44

Jumbo Group Ltd

Disclosure of Interest

Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies.

Singapore: As of 3 January 2016, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report.

Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report.

Hong Kong: KESHK may have financial interests in relation to an issuer or a new listing applicant referred to as defined by the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.

As of 3 January 2016, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report.

MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment and may receive compensation for the services provided from the companies covered in this report.

OTHERS

Analyst Certification of Independence

The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.

Reminder

Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase.

No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.

Ong Seng Yeow | Executive Director, Maybank Kim Eng Research

Definition of Ratings

Maybank Kim Eng Research uses the following rating system

BUY Return is expected to be above 10% in the next 12 months (excluding dividends)

HOLD Return is expected to be between - 10% to +10% in the next 12 months (excluding dividends)

SELL Return is expected to be below -10% in the next 12 months (excluding dividends)

Applicability of Ratings

The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies.

DISCLOSURES

Legal Entities Disclosures

Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938-H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This material is issued and distributed in Singapore by Maybank KERPL (Co. Reg No 197201256N) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Kim Eng Securities (“PTKES”) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Philippines: Maybank ATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange Commission. Vietnam: Maybank Kim Eng Securities JSC (License Number: 71/UBCK-GP) is licensed under the State Securities Commission of Vietnam.Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (“KESI”) is a participant of the National Stock Exchange of India Limited (Reg No: INF/INB 231452435) and the Bombay Stock Exchange (Reg. No. INF/INB 011452431) and is regulated by Securities and Exchange Board of India. KESI is also registered with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) US: Maybank KESUSA is a member of/ and is authorized and regulated by the FINRA – Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Services Authority.

January 3, 2016 45

Jumbo Group Ltd

Malaysia Maybank Investment Bank Berhad

(A Participating Organisation of

Bursa Malaysia Securities Berhad)

33rd Floor, Menara Maybank,

100 Jalan Tun Perak,

50050 Kuala Lumpur

Tel: (603) 2059 1888;

Fax: (603) 2078 4194

Singapore Maybank Kim Eng Securities Pte Ltd

Maybank Kim Eng Research Pte Ltd

50 North Canal Road

Singapore 059304

Tel: (65) 6336 9090

London Maybank Kim Eng Securities

(London) Ltd

5th Floor, Aldermary House

10-15 Queen Street

London EC4N 1TX, UK

Tel: (44) 20 7332 0221

Fax: (44) 20 7332 0302

New York Maybank Kim Eng Securities USA

Inc

777 Third Avenue, 21st Floor

New York, NY 10017, U.S.A.

Tel: (212) 688 8886

Fax: (212) 688 3500

Stockbroking Business:

Level 8, Tower C, Dataran Maybank,

No.1, Jalan Maarof

59000 Kuala Lumpur

Tel: (603) 2297 8888

Fax: (603) 2282 5136

Hong Kong Kim Eng Securities (HK) Ltd

Level 30,

Three Pacific Place,

1 Queen’s Road East,

Hong Kong

Tel: (852) 2268 0800

Fax: (852) 2877 0104

Indonesia PT Maybank Kim Eng Securities

Plaza Bapindo

Citibank Tower 17th Floor

Jl Jend. Sudirman Kav. 54-55

Jakarta 12190, Indonesia

Tel: (62) 21 2557 1188

Fax: (62) 21 2557 1189

India Kim Eng Securities India Pvt Ltd

2nd Floor, The International 16,

Maharishi Karve Road,

Churchgate Station,

Mumbai City - 400 020, India

Tel: (91) 22 6623 2600

Fax: (91) 22 6623 2604

Philippines Maybank ATR Kim Eng Securities Inc.

17/F, Tower One & Exchange Plaza

Ayala Triangle, Ayala Avenue

Makati City, Philippines 1200

Tel: (63) 2 849 8888

Fax: (63) 2 848 5738

Thailand Maybank Kim Eng Securities

(Thailand) Public Company Limited

999/9 The Offices at Central World,

20th - 21st Floor,

Rama 1 Road Pathumwan,

Bangkok 10330, Thailand

Tel: (66) 2 658 6817 (sales)

Tel: (66) 2 658 6801 (research)

Vietnam Maybank Kim Eng Securities Limited

4A-15+16 Floor Vincom Center Dong

Khoi, 72 Le Thanh Ton St. District 1

Ho Chi Minh City, Vietnam

Tel : (84) 844 555 888

Fax : (84) 8 38 271 030

Saudi Arabia In association with

Anfaal Capital

Villa 47, Tujjar Jeddah

Prince Mohammed bin Abdulaziz

Street P.O. Box 126575

Jeddah 21352

Tel: (966) 2 6068686

Fax: (966) 26068787

South Asia Sales Trading Kevin Foy

Regional Head Sales Trading

[email protected]

Tel: (65) 6336-5157

US Toll Free: 1-866-406-7447

North Asia Sales Trading Andrew Lee

[email protected]

Tel: (852) 2268 0283

US Toll Free: 1 877 837 7635

Malaysia Rommel Jacob [email protected] Tel: (603) 2717 5152

Thailand Tanasak Krishnasreni [email protected] Tel: (66)2 658 6820

Indonesia Harianto Liong [email protected] Tel: (62) 21 2557 1177

New York Andrew Dacey [email protected] Tel: (212) 688 2956

India Manish Modi [email protected] Tel: (91)-22-6623-2601

Vietnam Tien Nguyen [email protected]

Tel: (84) 44 555 888 x8079

Philippines Keith Roy [email protected] Tel: (63) 2 848-5288

www.maybank-ke.com | www.maybank-keresearch.com

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