Kimly - RHB Invest 2020-12-08: Defensive Bread & Butter; Maintain BUY


Kimly - Defensive Bread & Butter; Maintain BUY

  • Despite COVID-19 and a local lockdown to prevent the widespread of the pandemic, Kimly (SGX:1D0)’s business model has shown resilience, with revenue rising 1.2% and PATMI up 25.8%. However the strong showing was also partially due to aid from the Government.
  • Going forward, we expect new JVs and acquisitions to further boost Kimly's PATMI. As such, we lift FY21F (Sep) PATMI forecast by 5%, resulting in a higher target price.
  • Maintain BUY with new target price of S$0.34 from S$0.32. 10% upside and c.4% yield.

Delivery segment a potential key growth driver

  • 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 resulted in an increase in revenue and margins as compared to the pre-COVID-19 period.
  • For FY20, food delivery orders likely formed 5-10% of Kimly's revenue. We believe this may be due to the fact that food sold at the company’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.

Previous acquisitions 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 4.2% for FY21F.

Resilient yet attractive value proposition.

  • Kimly's management aims to expand 3-5 outlets annually – organically and inorganically. The company is also looking for complementary JVs to further expand its business.
  • With the majority of its earnings from the new acquisitions only to be realised in FY21F, Kimly will continue to provide steady growth for FY21F. Maintain BUY.
  • Downside risks to our call include a rise in rental rates, and labour shortage.

Jarick Seet RHB Securities Research | 2020-12-08
SGX Stock Analyst Report BUY MAINTAIN BUY 0.34 UP 0.320