Kimly - RHB Invest 2018-09-12: Visit To A Productive Coffee Shop

Kimly - RHB Securities Research 2018-09-12: Visit To A Productive Coffee Shop KIMLY LIMITED SGX:1D0

Kimly - Visit To A Productive Coffee Shop

  • Maintain BUY, Target Price of SGD0.46, 44% upside, based on our expectations of a better 4Q.
  • For the first instalment of our Expedition Series, we visited Kimly’s productive coffee shop which focuses on automation and digital solutions to improve efficiency, while reducing the reliance on manpower.
  • While adapting a QR code payment system will still take a while, its tray-return initiative is mutually beneficial for customers and should enable Kimly to save on manpower costs.



A new productive coffee shop.

  • Kimly has launched a productive coffee shop this year, tapping on automation and digital solutions to improve operational efficiency and decrease reliance on manpower. We visited the coffee shop on 5 Sep, tried out the NETS QR code payment and the tray return system.


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It will take time for consumers to use the QR code payment system.

  • Kimly has built-in self-service kiosks for patrons to pay by scanning unique QR codes. We think, however, the adaption of the QR code system will take awhile, with more improvements to be made.
  • Currently, customers have to make their way to kiosks to process the payment physically, after the QR code has been printed and handed out by an employee. Elderly consumers who are not tech-savvy may also find this harder to get used to.


Tray-return initiative quite successful.

  • As customers are rewarded with a discount if they return their trays to the station, 80-90% of customers cleared their own dishes after finishing up their meal during our visit. This initiative is more successful and effective, we believe, when compared to the other food outlets where patrons pay a deposit for a tray, and receive a refund when the tray is returned. Management said this initiative has been well-received by customers, and the rate of people making use of the initiative is high.


A better 4QFY18 (Sep) ahead; maintain BUY and SGD0.46 TP.

  • With ~SGD60m in cash remaining after acquiring Asian Story Corp (ASC), we think there will likely be larger and similar-styled acquisitions to come, as management is keen to expand Kimly’s presence rapidly in the beverage space – which should further improve profitability. Kimly has also gone on to place Asian Story drinks on the top rows of the shelves at their coffee shops.
  • With the earnings accretion from ASC’s fast-growing PATMI, we expect its numbers to be included in the group’s financials from 4QFY18 onwards – which will further boost Kimly’s PATMI. As a result, we do expect a better 4QFY18 ahead, and maintain our recommendation and DCF-backed Target Price.
  • Downside risks to our call include a rise in rental rates and labour shortages.





Jarick Seet RHB Securities Research | Lee Cai Ling RHB Invest | https://www.rhbinvest.com.sg/ 2018-09-12
SGX Stock Analyst Report BUY Maintain BUY 0.460 Same 0.460



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