Meanwhile, due to the cash-generative nature of its business, Kimly has a net cash balance of $69.3 million (23% of market cap) as of 1HFY2020. This allows it to pay one of the highest dividends as compared to its local competitors.
“Also, Kimly has begun acquiring more coffeeshops to add to its growing portfolio with recent acquisitions completed in 1HFY2020. By doing so, the acquisitions would help boost future revenues and profits when these assets start contributing significantly in three to five years post-acquisitions,” adds Tan.
Similarly, RHB Group Research is keeping its “buy” recommendation on Kimly with an increased target price of 32 cents, from 29 cents previously.
Analyst Jarick Seet believes that Kimly is a beneficiary of the still-high frequency of food delivery orders, which has formed a new core revenue stream for the group.
“For FY2020, 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 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,” says Seet.
In addition, its outlets are well spread-out across Singapore — mainly near or in housing estates — ensuring a wide reach for food delivery.
Kimly
Price target:
UOB Kay Hian “buy” 36 cents
RHB Group Research “buy” 32 cents
Feeding hungry heartlanders
Analysts are craving for more of coffeeshop chain operator Kimly, which is seen as a beneficiary of Covid-19 measures, as many people are still working from home.
“The advantages of coffeeshop operations include boosted earnings given the proximity to the heartlands, where many are working from home; easy access for online food delivery providers; and lower price point due to lower operating costs as compared to shopping malls,” says lead analyst Llelleythan Tan of UOB Kay Hian in an Oct 9 report, which initiated coverage with a “buy” call and a target price of 36 cents.
“As Singapore re-opens its economy following the lifting of circuit breaker measures, Kimly is well-positioned to ride on this as customers start to dine in at Kimly’s multiple restaurant brands,” says Tan, referring to the 65 coffeeshops it runs.
