Kimly - CGS-CIMB Research 2022-09-09: Divestment Of Confectionery Business

Kimly - Divestment Of Confectionery Business

  • On 9 Sep 22, Kimly's Announced the business transfer agreement with Muginoho Global for the complete disposal of the group’s confectionery business, Rive Gauche Patisserie.
  • Initially acquired by Kimly (SGX:1D0) together with Tonkichi for S$1.82m in Jul 18, Rive Gauche is involved in the operation of French-inspired confectionery outlets. As of end-Mar 22, Kimly operated seven Rive Gauche outlets.
  • The acquirer, Muginoho Global, is a wholly-owned subsidiary of Muginoho Holdings. Muginoho Holdings is headquartered in Japan and owns a portfolio of pastry and confectionery brands, such as Beard Papa’s and Cocofrans.
  • We believe the disposal of Rive Gauche was largely due to a lack of realisable synergies with Kimly’s core coffee shop operations.
  • Rive Gauche recorded FY21 (1 Oct 2020 to 30 Sept 2021) net profit of S$0.4m and 1HFY22 (1 Oct 2021 to 31 Mar 2022) net profit of S$0.1m. The purchase consideration of S$2.8m represents a one-off disposal gain of S$2.6m for Kimly upon completion of the transaction. Assuming flat h-o-h growth in net profit in 2H22F, the implied acquisition multiple is ~12x FY22F P/E, which we deem fair. The proceeds from the divestment will be used for general working capital purposes.
  • Kimly's net cash remains healthy at S$41m as of end-1H22. While rising prices could spur some downtrading activities as consumers spend on more affordable food products, we see limited near-term catalysts.
  • We reiterate HOLD recommendation on Kimly with an unchanged target price of S$0.41, still pegged to 15.4x CY23F P/E (0.5 standard deviation below its 5-year historical mean) in view of slowing growth prospects.
  • Kimly's Share Price currently trades at ~14x CY23F P/ (~1 standard deviation below its 5-year historical mean).

Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @

Kenneth TAN CGS-CIMB Research | ONG Khang Chuen CFA CGS-CIMB Research | 2022-09-09

Read also CGS-CIMB's most recent report:
2022-11-24 Kimly - Management Adopting A Cautious Tone.

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