Kimly on Nov 26 announced that its FY2020 earnings have increased by 25.8% t0 $25.2 million from $20.1 million a year ago.
This came on the back of a 1.2% y-o-y increase in revenue to $210.8 million. The group attributed the revenue growth to increased contribution from its food retail division which saw increased food delivery demand during the circuit breaker period, as well as and its newly diversified outlet investment business division.
The increase however was partially offset by lower contribution from the outlet management division, which saw a 7.0% y-o-y decrease, mainly due to decrease in beverage and tobacco product sales, mainly affected by the dine-in restrictions during the circuit breaker, as well as the drop in rental income from provision of cleaning services as the group passed on rental and property tax rebates granted by landlords to the stall tenants.
The group has declared a final dividend of 0.84 cents. Along with the interim dividend of 0.24 cents declared in 1HFY2020, the total dividends declared for FY2020 period amounts to 1.12 cents, representing a 52.6% payout of the group’s net profit and a dividend yield of 4.0%.
On the back of its positive results, analysts are keeping their upbeat stance on Kimly.
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RHB Group Research continues to rate Kimly “buy” with an increased target price of 34 cents from 32 cents previously.
In a Dec 8 report, analyst Jarick Seet says, “Despite Covid-19 and a local lockdown to prevent the widespread of the pandemic, Kimly’s business model has shown resilience, with revenue rising 1.2% and PATMI up 25.8%. However the strong showing was also partially due to aid from the Government. Going forward, we expect new JVs and acquisitions to further boost its PATMI.”
During the Circuit Breaker, Kimly benefited from the surge of food delivery demand through various platforms, which mitigated the drop in direct outlet sales. Even with the reopening of Phase 2 where the company has benefitted in terms of a recovery of crowds to its coffeeshops, food delivery orders saw only a slight dip.
The net impact resulted in an increase in revenue and margins as compared to the pre-Covid-19 period.
“For FY2020, food delivery orders likely formed 5-10% of 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. In addition, its outlets are well spread all across Singapore – mainly near or below housing estates – this ensures a wide reach for food delivery,” notes Seet.
With the completion of the Phase 2B of the Acquisition (total of eight food outlets), Kimly currently boasts a portfolio of 80 food outlets and 134 food stalls, representing an increase of 25.0% and 10.7% since its IPO. With its latest two JVs entered separated for two coffeeshops located at Bukit Batok and Upper Aljunied, Seet believes that this should further boost profitability in FY2021.
“We expect Kimly’s business to remain strong amidst this pandemic, and it will likely continue to reward shareholders with attractive dividends. We expect dividends to remain attractive at 4.2% for FY2021,” says Seet.
Similarly, UOB Kay Hian is maintaining its “buy” call on Kimly with a target price of 36 cents.
Apart from the increase in revenue, Kimly’s gross profit grew 38.9% y-o-y to $56.5 million largely due to government grants and foreign workers levy rebates amounting to $9.2 million. The group also passed down rental rebates from landlords to its stall tenants.
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“Looking forward, we expect Kimly to receive similar JSS support in FY2021,” says lead analyst Llelleythan Tan in a Nov 30 report. Tan also expects for all three of Kimly’s divisions to experience strong growth from the easing of social distancing measures and contributions from newly-refurbished/acquired coffee shops.
Kimly maintained its strong balance sheet and net cash position in spite of multiple acquisitions during FY2020. It also maintained a strong net cash position of $43.9 million and declared a final dividend of 8.4 cents.
Management has stated that they will maintain its policy of paying out more than 50% of annual earnings, which would imply a dividend yield of 4-5% going forward. Also, management is still on the lookout for more M&A opportunities as Kimly seeks to expand its coffee shop portfolio.
“Factoring in contributions from its newly-refurbished and acquired coffee shops, along with the expected easing of social distancing measures, we expect revenue in FY2021-2023 to grow to $227.9 million (8.1% y-o-y), $248.2 million (8.9% y-o-y) and $266.2 million (7.3% y-o-y) respectively, implying a modest strong revenue CAGR of 8.1% for FY2021-2023,” says Tan.
As at 12.20pm, shares in Kimly are trading at 30 cents or 3.0 times FY2021 book with a dividend yield of 4.2%, according to UOB Kay Hian’s estimates.
