SINGAPORE (May 9): RHB Research is keeping its “buy” call on Kimly with an unchanged target price of 43 cents after the coffeeshop operator reported a “superb 2Q18”.
Kimly saw its earnings grow 20.2% to $5.5 million for the 2Q ended March, as revenue climbed steadily by 3.8% to $49.2 million.
See: Kimly posts 20.2% rise in 2Q earnings to $5.5 mil
“This was on an increased number of coffeeshops and third-party brands outlets, as well as a 10.2% decrease in administrative costs due to the absence of listing expenses,” says lead analyst Jarick Seet in a Wednesday report.
“We expect such a performance to continue into subsequent quarters,” he adds.
The group currently runs 68 coffeeshops and four industrial canteens, as well as four food courts under the foodclique brand.
With an occupancy rate of around 98% across some 500 stalls within its food outlets, Kimly has also signalled its intention to add 1-2 coffeeshops annually, on top of ramping up on third-party brands.
“We also think that the new outlets it invested in during 2017 – and those coming up in 2018 – are likely to be profitable in 2019-2020. In addition, with M&As in the pipeline, we believe that growth would be exciting in the coming years,” Seet says.
In addition, the analyst notes that the stock traded at a price-to-earnings (P/E) ratio of 18.6 times in FY17 – below its peers’ average P/E of 24 times.
“We like the defensive and rich cash flow-generative nature of Kimly’s business,” Seet adds.
As at 11.27am, shares of Kimly are trading half a cent higher at 35 cents, implying an estimated P/E of 18.3 times and a dividend yield of 2.7% for FY18.
