UOB Kay Hian has kept its "hold" call and 36 cents target price on coffeeshop chain operator Kimly 1D0 , following its FY2023 earnings that came in "slightly above" expectations. However, analysts John Cheong and Heidi Mo, in their Dec 15, warn of margin compression in the current FY2024 because of higher cost pressures.
For the year ended Sept, Kimly reported patmi of $36.5 million, up 7.2% y-o-y, on the back of a revenue of $313.9 million, down 1.2% y-o-y, no thanks to the closure of several stalls.
Due to higher wage and utilities costs, gross margins fell by 0.5 points y-o-y.
Thanks to a strong balance sheet, with net cash of some $71.4 million as at Sept, along with strong operating cashflows, Kimly is maintaining its policy of paying out more than 55-60% of annual earnings, which would imply a decent dividend yield of 5-7% moving forward, the analysts say.
For 2HFY2023, Kimly is paying 1.12 cents, bringing the full-year total to 1.68 cents, implying a payout ratio of 57.2%, down from FY2022's 61.4%. The payout is a "decent" yield of around 5%, state Cheong and Mo.
Meanwhile, due to rising costs, including higher wages mandated for certain lower income workers, Cheong and Mo see Kimly facing margin compression this current FY2024.
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For the current FY2024 and coming FY2025, they've lowered their patmi estimate but raised it for FY2026.
Cheong and Ho's 36 cents target price is pegged to 12x (0.5 sd below mean) FY2024 estimated PE due to increasing costs from inflationary pressures.
