JUMBO Group Ltd (SGX: 42R) is well-known for its eponymous seafood restaurants around Singapore that serve the famous chilli crab. Its other brand of restaurants includes JPot, Ng Ah Shio Bak Kut Teh, Chui Huay Lim Teochew Cuisine and J Cafe. JUMBO Group went public in November 2015.
Jumbo Group is currently trading close to its 52-week low price. This raises a question: Is the company trading at a bargain price now?
Unfortunately, there is no easy answer to this. Still, I will try to answer that question by looking at its valuation. To do so, I will compare Jumbo Group’s current valuation to the market in terms of three perspectives, namely, price-to-book (PB), price-to-earnings (PE) and dividend yield. This should give us some hints whether the company is trading at a bargain price.
I will be using the SPDR STI ETF (SGX: ES3) as a proxy for the market; the SPDR STI ETF is an exchange-traded fund that tracks the fundamentals of Singapore’s stock market benchmark, the Straits Times Index (SGX: ^STI).
Jumbo Group currently has a PB ratio of 5.4 times, which is significantly higher than the SPDR STI ETF’s PB ratio of 1.3. This makes Jumbo Group 410% dearer than the broad market, based on the PB ratio. Moreover, Jumbo Group’s PE ratio is 124% higher than that of the SPDR STI ETF (26.2 vs 11.6).
Similarly, Jumbo Group has a lower dividend yield of 1.75% as compared to the market’s yield of 2.89%. On that basis, Jumbo Group is currently trading at a premium of 65% to the market’s dividend yield.
Putting all the three metrics together, we can argue that Jumbo Group is trading at a premium to the market average, despite trading close to its 52-week low price. This is due to its high PB and PE ratio, and low dividend yield.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn't own shares in any companies mentioned.