Kimly - UOB Kay Hian 2020-11-30: FY20 Robust Results In Spite Of The COVID-19 Pandemic

KIMLY LIMITED (SGX:1D0)

Kimly - FY20 Robust Results In Spite Of The COVID-19 Pandemic

Kimly reported robust FY20 results as support from the JSS helped to boost earnings. FY20 net profit grew 25.8% y-o-y to S$25.2m, forming 105% of our full-year forecasts. Gross profit soared 38.9% y-o-y largely due to government grants and rebates.
Kimly still has:
1. a high net cash balance of S$43.9m;
2. a higher dividend yield vs peers; and
3. strong future earnings growth from newly-acquired/refurbished coffee shops.

Kimly (SGX:1D0) reported robust results as support from the Jobs Support Scheme (JSS) helped boost earnings for FY20.
Kimly’s FY20 revenue and net profit was S$210.8m (+1.2% y-o-y) and S$25.2m (+25.8% y-o-y) respectively, forming 102% and 105% of our full-year forecasts.
Gross profit grew 38.9% y-o-y to S$56.5m largely due to government grants and foreign workers levy rebates amounting to S$9.2m. Rental rebates from landlords amounted to S$5.3m of which S$3.7m was passed down to stall rentals.
Looking forward, we expect Kimly to receive similar JSS support in FY21.

FY20 revenue from the outlet management segment fell by 7.0% y-o-y as sales from drinks stalls suffered due to COVID-19 Circuit Breaker restrictions. However, FY20 revenue from Kimly’s food retail segment increased by 7.4% y-o-y as sales from online food delivery rose during the circuit breaker.
Also, Kimly’s stronger online food presence and increased marketing efforts resulted in an increase in online patronage.
Kimly’s new outlet investment segment, consisting properties acquired during FY20, contributed S$3.1m in revenue.
Looking forward, we expect all three divisions to experience strong growth from the easing of social distancing measures and contributions from newly-refurbished/acquired coffee shops.

Kimly maintained its strong balance sheet and net cash position in spite of multiple acquisitions during FY20. It also maintained a strong net cash position of S$43.9m and declared a final dividend of S$0.0084/share. This implies a total FY20 dividend of S$0.0112/share and a dividend payout ratio of around 52%.
Management has stated that they will maintain its policy of paying out more than 50% of annual earnings, which would imply a dividend yield of 4-5% going forward. Also, management is still on the lookout for M&A opportunities as Kimly seeks to expand its coffee shop portfolio.

Factoring in contributions from its newly-refurbished and acquired coffee shops, along with the expected easing of social distancing measures, we expect Kimly's revenue in FY21-23 to grow to S$227.9m (+8.1% y-o-y), S$248.2m (+8.9% y-o-y) and S$266.2m (+7.3% y-o-y) respectively, implying a modest strong revenue CAGR of 8.1% for FY21-23.
We also expect Kimly's net profit in FY21-23 to grow to S$27.5m (+9.0% y-o-y), S$30.7m (+11.6% y-o-y) and S$33.0m (+7.3% y-o-y) respectively, implying a strong net profit CAGR of 9.3% for FY21-23.

Maintain BUY on Kimly with unchanged PE-based target price of S$0.36, based on 15.0x FY21F PE, pegged to Kimly’s 3-year average mean PE. Kimly is currently trading at 12.1x FY21F PE.
See Kimly Share Price; Kimly Target Price; Kimly Analyst Reports; Kimly Dividend History; Kimly Announcements; Kimly Latest News.
As Kimly is trading well below its average mean PE, we reckon that Kimly should be trading closer to its Singapore peers’ 2021F PE of 18.1x or nearer to its closest rival, Koufu (SGX:VL6) (14.3x 2021F PE).
Catalysts to Kimly's share price:
- Earlier-than-expected Phase 3 re-opening.
- Better-than-expected contributions from newly-acquired coffee shops.

Llelleythan Tan UOB Kay Hian Research | Joohijit Kaur UOB Kay Hian | https://research.uobkayhian.com/ 2020-11-30

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