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Jumbo Group Ltd (JUMBO SP)

Time for Tasty Re-Rating


Expansion catalysts; BUY

We resume coverage of JUMBO with a contrarian BUY and DCF TP of SGD0.70 (WACC 9%). Our TP implies 26x FY18E EPS, on par with regional F&B peers. Leveraging its reputation and consistent quality, JUMBO aims to open 4-5 new outlets a year in FY18-20E, up from just one historically. Rapid profitability in just one month for its Beijing outlet opened in Jul 2017 demonstrates the Chinese consumer’s confidence in its brand and JUMBO’s execution ability, in our view. We expect catalysts from a 3- year EPS CAGR of 15%, backed by: 1) more new outlets; 2) low upfront costs for expansion through JVs and franchises; and 3) operating leverage. Risks include execution missteps or delays.


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Thai Beverage

A US$5bn acquisition is in sight




 Tapping into Vietnam’s US$6.5bn beer market via acquisition of over 25% of Sabeco

 Sole bidder with advantage via Vietnamese-incorporated associate

 25% stakes in Sabeco costs at least THB36bn, an implied trailing PER of 47.5x

 Maintain Buy with SOTP-derived TP of S$1.18


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Strategy: Sailing into another good year

Global equities had a good year, led by optimism of better global economic outlook and supported by healthy corporate earnings growth in a generally benign operating environment. Asia outperformed the rest of the world with the 36% gain by the MSCI Asia Pacific ex-Japan Index. In Singapore, gains by the banking and property stocks led
the STI up 20%. While valuations are no longer as cheap as 12 months ago, upside remains. Our 2017 Singapore property stocks have done well, but we continue to have a bias for this sector in 2018. For Singapore stocks, our picks are CapitaLand, City Developments, DBS, Frasers
Centrepoint Trust, Frasers Logistics & Industrial Trust, Keppel Corp, Mapletree Greater China Commercial Trust, Sembcorp Industries, SingTel, UOL, Venture Corp, Wheelock Properties and Wing Tai.


Limited Downside From Current Share Price


Downside risks to CPO prices would be quite limited from hereon, as they have fallen below MYR2,450/tonne in December. However, we think there is a lack of catalysts for a significant share price recovery as demand may be hampered by India’s higher import taxes and Indonesia’s lower biodiesel quota in 1H18. Meanwhile, although La Niña is expected to be mild, any major volatility in soybean prices could affect soybean crush margins. We raise our in-house CPO price assumptions but maintain NEUTRAL on the stock but with a slightly lowered TP of SGD3.31 (from SGD3.33, 6% upside).


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CapitaLand Retail China Trust


Rock Square: on growth path

Acquisition of Rock Square an indication growth.

After the divestment of CapitaMall Anzhen, CapitaLand Retail China Trust (CRCT) has acquired a much younger asset, Rock Square in the first-tier city of Guangzhou. Although the initial yield is lower in comparison, we believe the asset has greater growth potential and is also an indication of CRCT’s embarking on a growth path.



LionelLim8.16Check out our compilation of Target Prices

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