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Record profits and dividends

  • FY21 net profit rose by 55.7% y-o-y to S$39.3m from S$25.2m in FY20; 11.3% above our expectations
  • Final dividend of 0.84 Scts and special dividend of 0.60 Scts; FY21 DPS at 2 Scts
  • Likely continuation of positive WFH trend and earnings boost from Tenderfresh bode well for FY22
  • Maintain BUY and TP of S$0.50
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Investment Thesis:

Maintain BUY and TP of S$0.50, implying upside of 22%. The stock is trading at an undemanding 12x FY22F PE, c.0.5 SD below its five-year mean of 15x. With 5%/8% net profit growth in FY22F/FY23F as well as strong cash flow generation supporting a decent yield of 4.0% in FY22F, we see Kimly as an attractive BUY.

Uplift in Food Retail earnings driven by latest acquisition of 75% stake in Tenderfresh business in Oct 2021. The acquisition will add 14 concepts and 41 food stalls to Kimly’s count and will begin its earnings contribution of c.S$7m (17% of total earnings) in FY22F. Leveraging Tenderfresh’s position in the Halal market, Kimly will be able to reach out to the 14% Muslim population in Singapore. Synergies expected from the acquisition include cross-selling and streamlining of processes. We project a 30% revenue CAGR in FY21-23F for the Food Retail segment.

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More acquisitions to drive further upside to earnings. We understand that there is a limited supply of long-term leasehold coffeeshop properties for sale or lease, there could be further upside to our estimates if Kimly can deliver more acquisitions by using its strong balance sheet to fund inorganic growth.

Valuation:

We maintain our BUY call and TP of S$0.50, representing 22% potential upside. Our TP is pegged to a c.15x FY22F PE, which is its five-year average.

Where we differ:

There is upside to our estimates if Kimly can deliver more acquisitions than expected.

Key Risks to Our View:

Resurgence of COVID-19 cases, labour shortages, failure to obtain renew leases, and rising raw material costs.