SINGAPORE (Sept 12): RHB Research is keeping its “buy” call on coffeeshop operator Kimly with an unchanged target price of 46 cents following a visit to the group’s “productive” coffeeshop.
The outlet taps on automation and digital solutions to improve operational efficiency and decrease reliance on manpower. These include a NETS QR code payment system and a tray return system.
“As customers are rewarded with a discount if they return their trays to the station, 80-90% of customers cleared their own dishes after finishing up their meal during our visit,” lead analyst Jarick Seet says in a Wednesday report.
The way Seet sees it, this is more successful and effective than similar initiatives by other food outlets, where patrons pay a deposit for a tray and receive a refund when the tray is returned.
However, the analyst is less impressed by Kimly’s QR code payment system.
“Customers have to make their way to kiosks to process the payment physically, after the QR code has been printed and handed out by an employee,” says Seet.
In addition, he opines that elderly consumers who are not tech-savvy may also find this process harder to get used to.
“It will take time for consumers to use the QR code payment system,” he says, adding that more improvements will need to be made to the payment system.
Meanwhile, Seet says Kimly is keen to rapidly expand its presence in the beverage space, which should further improve profitability. He notes that the group has started to place drinks from newly-acquired Asian Story Corp (ASC) the top rows of the shelves at their coffeeshops.
“With approximately $60 million in cash remaining after acquiring Asian Story Corp (ASC), we think there will likely be larger and similar-styled acquisitions to come,” Seet says.
“With the earnings accretion from ASC’s fast-growing PATMI, we expect its numbers to be included in the group’s financials from 4Q18 onwards – which will further boost Kimly’s PATMI,” he adds.
As at 11.36am, shares in Kimly are trading flat at 32.5 cents, implying an estimated price-to-earnings ratio of 17.3 times and a dividend yield of 2.9% for FY18. RHB’s target price represents an upside of around 44%.
