Singapore F&B Sector - Continued Recovery In Restaurants

Singapore F&B Sector - CGS-CIMB Research 2023-03-20: Continued Recovery In Restaurants

SGinvestors.io

Published: 2023-04-03 01:19 PM

KIMLY LIMITED (SGX:1D0) JUMBO GROUP LIMITED (SGX:42R)

According to latest Singstat data,
- Total F&B sales in Singapore (seasonally adjusted) rose 20% y-o-y in Jan 23, driven by recovery in both restaurant (+19% y-o-y) and café & food court (+13% y-o-y) sales. Restaurant sales recovery in 4Q22 was likely due to post-COVID recovery in recreational and corporate dine-in activities, and increasing tourist arrivals. Similarly, café & food court sales recorded healthy growth through 4Q22, albeit at a slower pace compared to restaurants as such outlets were far less affected by dine-in restrictions.
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We forecast a net profit of S$8.6m for Jumbo in FY23F (vs. FY22: S$0.1m net loss), driven by:
1. Healthy restaurant spending as corporate meals ramp-up (pre-COVID, corporate meals formed about 1/3 of Jumbo’s customer mix).
2. Return of North Asian tourists to Singapore (similar to corporate meals, tourists formed about 1/3 of Jumbo’s customer mix during pre-COVID times).
3. Easing of domestic pandemic measures in China (pre-COVID, China outlets typically contributed ~20% of Jumbo's revenue). Resumption of domestic travel could drive up revenue contribution from the Universal Beijing Resort outlet; the outlet only commenced operations in Sep 21 and was thereafter adversely impacted by sporadic lockdowns implemented in FY22.
Our target price of S$0.35 for Jumbo is based on 20.0x CY24F P/E, 1.5 standard deviation below its 3-year historical mean.