SINGAPORE (Aug 10): RHB Research is keeping its “buy” call on Kimly with an unchanged target price of 46 cents – implying an estimated upside of 35% – despite the traditional coffeeshop operator reporting a dip in its earnings for the 3Q ended June.
Kimly saw its 3Q18 earnings fall 4.8% to $5 million on the back of higher property, plant and equipment depreciation costs.
However, 3Q18 revenue grew 4.2% to $49.9 million, boosted mainly by higher contributions from both the group’s outlet management and food retail divisions.
See: Kimly reports 4.8% dip in 3Q earnings to $5 mil
“We expect a better 4Q18 ahead, mainly on contributions from its recent acquisition, Asian Story Corp (ASC),” says lead analyst Jarick Seet in a Friday report.
Seet estimates that Kimly has some $60 million in cash left in its war chest after the ASC acquisition.
“We think there will likely be larger and similar-styled acquisitions to come, as management is keen to expand Kimly’s presence rapidly in the beverage space,” he adds. “This should further propel the company’s profitability.”
The way Seet sees it, the beverage wing is also complimentary to Kimly’s existing business, as the firm can sell such beverages at all its coffeeshop outlets.
“With the earnings accretion from ASC’s fast-growing PATMI, we do expect the inclusion of the latter’s earnings – from 4Q18 onwards – to help further boost Kimly’s PATMI. As a result, we do expect a better 4Q18 ahead,” Seet says.
As at 3.43pm, shares in Kimly are trading flat at 33.5 cents, implying an estimated price-to-earnings ratio of 17.1 times and a dividend yield of 2.9% for FY18.
