Are These 3 Crab Stocks "Crap"?: Jumbo Group, No Signboard Holdings, And Tung Lok Restaurants
 
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Are These 3 Crab Stocks "Crap"?: Jumbo Group, No Signboard Holdings, And Tung Lok Restaurants

Isaac Chan
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I walked past a zi char store a few days ago and noticed a couple of kids staring at the live crabs in a glass case. As they were making faces and trying to goad the crabs into giving them a reaction, it occurred to me that I could compare the shares of three different restaurants which are renowned for their crabs: JUMBO Group Limited (SGX: 42R), No Signboard Holdings (SGX: 1G6), and Tung Lok Restaurants 2000 Ltd (SGX: 540).

Business Model

Before going into the financials, it would be good if we can have some understanding of these 3 restaurants business models.

1. Chilli Crab – JUMBO Group Limited (SGX: 42R)

Stocks Discussion: Jumbo (SGX:42R), No Signboard Holdings (SGX: 1G6), Tung Lok Restaurants Ltd (SGX:540)
Source: Foodpanda

Jumbo does not just operate their namesake restaurant. They also have various F&B outlets across China, Taiwan, Thailand, Vietnam and Japan. Additionally, JUMBO also provides catering services for customers in Singapore. Finally, they also sell packaged sauces and spice mixes for some of its signature dishes which you can find in supermarkets.

2. White Pepper Crab – No Signboard Holdings (SGX: 1G6)

Stocks Discussion: Jumbo (SGX:42R), No Signboard Holdings (SGX: 1G6), Tung Lok Restaurants Ltd (SGX:540)
Source: Entree Kibbles

You could say that No Signboard Holdings was founded on its White Pepper Crab dish. The founder, Mdm Ong, start selling this dish first at a hawker centre in the 1970s. Today, the firm operates other different F&B outlets and distribute their craft beer. Unfortunately, the firm has been embattled in controversy lately due to alleged share-buybacks.

3. Dancing Crab – Tung Lok Restaurants 2000 Ltd (SGX: 540)

Stocks Discussion: Jumbo (SGX:42R), No Signboard Holdings (SGX: 1G6), Tung Lok Restaurants Ltd (SGX:540)
Source: Dancing Crab

Tung Lok might be less famous for a particular crab dish, but one of the restaurants they operate is called “Dancing Crab” – and it’s a pretty popular place with the younger, dine-out-on-the-weekends group.

Currently, the group owns and manages over 35 restaurants in Singapore, China, Indonesia, Japan, and Vietnam. They also have their catering and manufacturing arm – I had their packaged herbal chicken a few days ago which was pretty good.

Revenue And Profitability

 Tung LokJumboNo Signboard
FYE 31.03.18FYE 30.09.18FYE 30.09.18
Revenue ($'000s)85,723153,03926,501
EBITDA Margin2.20%11.97%-5.46%
EBIT Margin-1.85%8.82%-6.86%
Net Profit Margin-2.07%6.94%-9.14%

Some Definitions

Before we look at the numbers, it will be good to explain the terms I will be using.

Firstly, EBITDA stands for Earnings Before Interest Taxes, Depreciation and Amortisation. That is quite a mouthful, but it just stands for earnings without the inclusion of these different costs. Depreciation and Amortisation are non-cash expenses, and so the removal of them helps to improve comparisons.

Operating Profit here looks at earnings without the inclusion of interest and taxes.

This is an important metric to look at too because different companies have different interest expenses due to the amount of debt the business has. Again, the exclusion of interest expense makes comparison easier.

Finally, Net Profit just refers to revenue minus all kinds of expenses.

Comparisons

When we look at the three stocks, it’s easy to see that Jumbo generates the most revenue and is arguably the most profitable. Naturally, Jumbo would be the winner in this category. Our next winner is Tung Lok, followed by No-Signboard.

By itself, Jumbo’s profitability looks fairly alright. Although Tung Lok beats No Signboard, the company itself still made a net loss, which is unfavourable. Tung Lok and No Signboard, therefore, have weak earnings.

Balance Sheet Strength

 Tung LokJumboNo Signboard
FYE 31.03.18FYE 30.09.18FYE 30.09.18
Current Ratio1.723.323.91
Cash Ratio
1.282.573.48
Debt / EBITDA Ratio1.160.00-1.42
Interest Coverage Ratio-8.61(No Interest Expenses)-25.97

Some Definitions

Without delving too much into technicalities, the current ratio and cash ratio are both a measure of short-term liquidity. This is a measure of how well a firm can meet its short-term financial obligations such as paying off loans, paying suppliers and employees etc. The higher these ratios, the better.

Debt/EBITDA is a measure of the debt the company has, to the earnings of the firm. Such a metric is important because we can see if the firm can earn enough to pay off the debts. The lower the ratio, the better, because I earn more relative to the debt I have.

Interest Coverage Ratio looks at earnings relative to interest payments that the firm has to make. Again, the higher the ratio, the better, since there are more earnings to cover interest payments.

Comparisons

Just looking at these few metrics, Jumbo seems to be the winner here.

The company holds no debt, and also have no interest payments to make.

They also a high current and cash ratio. No Signboard, however, has got a higher current and cash ratio, which might suggest higher short-term liquidity than Jumbo. However, Jumbo’s ratios by itself are already good on its own and having excess short-term liquidity may not add much value.

No Signboard, however, had the lowest earnings, which was also negative. Hence, their Debt/EBITDA and Interest Coverage ratio are the weakest among the three.

Tung Lok’s current and cash ratio are not as high as the other two companies, but their earnings are still negative, though they are not as bad as No Signboard. It is hard to tell whether Tung Lok beats No Signboard on this count, but No Signboard’s worse earnings are a worry.

Company Valuation

 Tung LokJumboNo Signboard
P/E Ratio(Negative Earnings)22.73(Negative Earnings)
P/B Ratio3.053.851.65
P/S Ratio0.521.711.39

Some Definitions

The P/E, P/B and P/S ratios seek to answer how much a company’s share is worth relative to a certain aspect of the company’s financials. For example, the P/E ratio is Share Price divided by Earnings per Share. This expresses how much you are willing to pay for every one dollar that the share earns. The more you are willing to pay for each aspect of the business, the more highly valued the share is.

Comparisons

Again, Jumbo comes out as the most highly valued. However, a comparison between Tung Lok’s and No Signboard’s shares seem less clear. Tung Lok and No Signboard both do not have P/E ratios displayed, as both their earnings were negative.

Closing Thoughts

Jumbo Group Logo

To conclude, Jumbo seems to have:

  • Best profitability
  • Best balance sheet
  • Highest valuation

But does that mean we should buy into their shares?

Not necessarily, because there are several other factors that you might have to consider as well, such as growth profile, risks etc.

In fact, I have written about these 3 stocks individually, so click on their respective links to get a better grasp on whether these are good stocks to invest in.

Jumbo Group Ltd (SGX:42R)

Stocks Discussion: Jumbo (SGX:42R), No Signboard Holdings (SGX: 1G6), Tung Lok Restaurants Ltd (SGX:540)

Tung Lok Restaurants 2000 Ltd (SGX: 540)

Stocks Discussion: Jumbo (SGX:42R), No Signboard Holdings (SGX: 1G6), Tung Lok Restaurants Ltd (SGX:540)

No Signboard Holdings (SGX: 1G6)

Stocks Discussion: Jumbo (SGX:42R), No Signboard Holdings (SGX: 1G6), Tung Lok Restaurants Ltd (SGX:540)

 

Which restaurant’s crab dish do you like best? And which stock would you buy? Let us know in the comments below!

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About Isaac Chan
An aspiring quant (with a background in Finance) who is comfortable with numbers, loves obscure investment strategies and speaks Disney fluently.
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