KIMLY LIMITED (SGX:1D0)
Kimly - Beneficiary Of Still High Food Delivery Orders; BUY
- Kimly (SGX:1D0) continues to benefit from still-high food delivery orders, albeit slightly declining q-o-q. This is despite the return of crowds to its coffeeshops post Circuit Breaker Phase 2. We forecast delivery orders will form 15-20% of total revenue. Management announced a few JVs and acquisitions, which should further boost PATMI.
- We lift our Kimly's FY20F PATMI by 14%, resulting in the higher target price.
Delivery orders have formed a new core revenue stream
- During the Circuit Breaker, Kimly benefited from the surge of food delivery demand through various platforms such as GRAB and Foodpanda, which mitigated the drop in direct outlet sales. Even with the reopening of Phase 2 where the company has benefitted in terms of a recovery of crowds to its coffeeshops, food delivery orders saw only a slight dip. The net impact still results in an increase in revenue and margins as compared to the pre- COVID-19 period.
- For FY20F, we project for food delivery orders to likely form 15-20% of total revenue. We believe this may be due to the fact that food sold at Kimly’s outlets is one of the most affordable options among the various food delivery platforms, making it more sustainable for the average family in Singapore in this flagging economy.
- In addition, Kimly's outlets are well spread all across Singapore – mainly near or below housing estates – this ensures a wide reach for food delivery.
M&A to spur growth for FY21F
- With the completion of the Phase 2B of the Acquisition (total of eight food outlets), Kimly currently boasts a portfolio of 80 food outlets and 134 food stalls, representing an increase of 25.0% and 10.7% since its IPO.
- On 9 Sep, Kimly entered into two separate JVs with two coffeeshops located at Bukit Batok and Upper Aljunied, which should further boost profitability for FY21F.
Attractive yield of 4.8% for FY20F.
- We expect Kimly’s business to remain strong amidst this pandemic, and it will likely continue to reward shareholders with attractive dividends. We expect Kimly's dividends to remain attractive at 4.8% for FY20F. See Kimly Dividend History.
Defensive yet attractive value proposition.
- With government support – grants and rental rebates – totalling SGD6-8m this year; Kimly's defensive business nature proven in this pandemic; growing food delivery revenue stream; coupled with a 4.8% FY20F yield and profitability boosted by its acquisitions and JVs, we maintain BUY with a higher DCF-backed Target Price of SGD0.32.
- See Kimly Share Price; Kimly Target Price; Kimly Analyst Reports; Kimly Dividend History; Kimly Announcements; Kimly Latest News.
- Downside risks include a rise in rental rates, and labour shortage.
Jarick Seet
RHB Securities Research
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https://www.rhbinvest.com.sg/
2020-10-09
SGX Stock
Analyst Report
0.32
UP
0.260
