Kimly Ltd - RHB Invest 2018-05-09: A Superb 2Q18

Kimly Ltd - RHB Invest 2018-05-09: A Superb 2q18 KIMLY LIMITED SGX: 1D0

Kimly Ltd - A Superb 2Q18

  • Kimly reported a superb 2Q18, with revenue steadily growing at 3.8% y-o-y and PATMI surging 20.2% y-o-y. This was on an increased number of coffeeshops and third-party brands outlets, as well as a 10.2% decrease in administrative costs due to the absence of listing expenses.
  • We expect such a performance to continue into subsequent quarters. An interim dividend of SGD0.0028 has been declared.
  • Management has also managed to open a new coffeeshop in Ghim Moh and added another four food stores to Kimly’s network.
  • Maintain BUY and DCF-based SGD0.43 Target Price, 23% upside.



Kimly reported a superb 2Q18

  • Kimly reported a superb 2Q18, with revenue steadily growing at 3.8% y-o-y and PATMI surging 20.2% y-o-y. This was due to an increased number of coffeeshops and third-party brands outlets, as well as a 10.2% decrease in administrative costs due to the absence of listing expenses.


Net cash position of SGD85.5m, interim dividends declared.

  • As at 2Q18, Kimly had a strong net cash position of SGD85.5m accompanied by zero debt. As a result, management declared an interim dividend of SGD0.0028, representing a payout ratio of 28.9%. 
  • We expect the final dividend to be significantly higher, at around 50% payout ratio of PATMI.


Actively seeking M&As and JVs.

  • With strong net cash balance of SGD91m, as well as consistent and recurring positive cash flows, management is interested to look into acquisition targets for vertical integration. 
  • It may look for value-accretive acquisitions or JVs in the region of SGD10-20m to boost up its value chain proposition in 2018-2019. This is likely to add around 10-15% of PATMI to FY18, which we have not yet included in our estimates.


Expanding outlets through new store openings and managing third party brands.

  • Today, the group operates and manages 68 coffeeshops and four industrial canteens under the Kimly and third-party brands. It also operates four food courts under the foodclique brand. As at 30 Sep 2017, Kimly enjoyed a 98% occupancy rate across nearly 500 stalls within its managed food outlets. 
  • Management is looking to add up to 1-2 coffeeshops annually, as well as ramping up on third-party brands – which it has been doing. 
  • We are expecting at least 3-4 more additions to its portfolio in FY18.


Maintain BUY with an unchanged DCF-backed Target Price of SGD0.43.

  • We like the defensive and rich cash flow-generative nature of Kimly’s business. 
  • We also think that the new outlets it invested in during 2017 – and those coming up in 2018 – are likely to be profitable in 2019-2020. In addition, with M&As in the pipeline, we believe that growth would be exciting in the coming years. 
  • The stock is also trading below the peers’ average P/E of 24x. Accompanied by a superb 2Q18, we remain positive on Kimly and maintain our BUY recommendation and DCF-derived Target Price of SGD0.43 (WACC: 7.5%, TG: 1%).
  • Key risks to our call include rises in rental rates and labour shortages.






Jarick Seet RHB Invest | Lee Cai Ling RHB Invest | https://www.rhbinvest.com.sg/ 2018-05-09
SGX Stock Analyst Report BUY Maintain BUY 0.430 Same 0.430



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