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abacus overseas markets are intact and now include franchise and JV possibilities. We expect more concrete developments in this area to provide catalysts in coming months.” China now accounts for 18% of the group’s revenue, up from just 6% in the beginning of 2015. The group is also expanding with a new concept of restaurants catering to that other traditional Singaporean dish normally enjoyed along Balestier Road early in the morning – Bukkete. DBS analyst Alfie Yeo notes Jumbo opened its fifth Ng Ah Sio Bak Kut Teh in Resorts World Sentosa (1,600 square feet) and expanded its Riverside outlet by 50% from 300 seats to 450 seats in 4Q16. But it is in China where the largest opportunities lie, with Singapore almost being a testing ground for new concepts the group can then franchise around the region. The big question is whether demand would expand ten-fold The Jumbo Seafood brand, which comprises five outlets in Singapore and three in Shanghai, was a key revenue contributor for FY16. Seafood in China accounted for 15% Will SingPost’s new 100,000 parcel a day sorting centre deliver, Jumbo of revenue, whilst Jumbo Seafood outlets in or will the facility prove to be money in the bin? Singapore contributed majority of the group’s total revenue. Some other interesting facts t is one thing to plan for the future, also be required for productivity gains as crunched by DBS are the average meal size but another to believe your business SingPost builds up scale. Margins in the for the company at its outlets, with China will quickly expand ten-fold as logistics space are lower than mail, and being more expensive than Singapore. Locally, SingPost must believe with its massive competition in e-commerce logistics has this works out to an average annual revenue $182m investment in a new parcel sorting also been increasing. Of course investors of more than $10m per outlet in Singapore. centre at Tampines. It is a very impressive just want to hear about the profits and Jumbo serves more than 6,800 diners (across building which was opened in the second dividends, and here they have been half of 2016 and employs the kind of disappointed. In order to pay for all the new all restaurant brands) and more than 1.6 sophisticated sorting technology that investments, the company decided to cut its tonnes of crabs each day. the big boys like Amazon use. The most dividend payout ratio, which sent the shares How Jumbo stacks up on profitability impressive fact about the new sorting plummeting 12% on the day it announced centre, which is part of SingPost’s hopeful its weaker Q2 profits. & returns foray into delivering e-commerce ordered parcels rather than bank statements, is its Jumbo opportunities 100,000 parcel a day capacity. Singapore is rightly renowned for having To the casual observer, this may seem one of the largest and greatest selection of immensely impressive, which it is, but restaurants per square kilometre on the when you realise that SingPost currently planet. Yet few would have envisaged that only delivers just over 10,000 parcels a day some of our homegrown brands can not and is under intense competition from only dominate the local scene but turn into other parcel deliverers, one has to wonder regional champions. Jumbo Seafood is one Source: FactSet estimates, Maybank Kim Eng just how quickly they are going to be able such company, and one thing is certain – to increase their business ten-fold. almost everybody likes a chilly crab. Perhaps it was the sight of DHL’s The company turned over $137m in Causes of SingPost’s underlying net impressive new sorting facility which 2016 and netted a gross profit of $15m, profit decline cost $140m at Changi Airfreight with a and has a market capitalisation of almost fully automated express parcel sorting half a billion dollars. But there could be and processing system, allowing it to more room to grow, reckons Maybank Kim process 24k shipments and documents Eng’s Gregory Yap who says the results an hour, that spurred SingPost into its confirmed two things. “First, that Jumbo’s massive capital outlay decision. And earnings in Singapore can be resilient even as OCBC notes, as SingPost builds up in times of belt-tightening due to effective its e-commerce logistics capabilities, market positioning and management of investments will be required, driving labour, rental costs, etc. Second, overseas Source: Company data (compiled by OCBC) up expenses in the near term. Time will expansion and growth potential from

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SINGAPORE BUSINESS REVIEW | JANUARY 2017 21


Singapore Business Review (December 2016 - January 2017)