Kimly - Management Adopting A Cautious Tone
- Kimly (SGX:1D0)’s 2HFY22 (Apr 2022 to Sep 2022) net profit of S$15m (-16% h-o-h, -12% y-o-y) was in line with our expectations, but slightly below consensus’, with FY22 net profit forming 101% of our and 94% of Bloomberg consensus’ full-year forecasts.
- 2HFY22 revenue rose to S$161m (+3% h-o-h, +39% y-o-y), driven by better outlet management revenue and new contribution from Tenderfresh. However, 2HFY22 operating profit margin declined 4.4% points y-o-y, on the back of rising input (food and utilities) and labour costs.
- Kimly proposed a final dividend of 1.12 cents, bringing FY22 total dividend to 1.68 cents (4.8% yield). See Kimly's Dividend History.
- As Kimly specialises in mass market F&B options, we believe the group could benefit from potential downtrading as consumers exercise financial prudency. However, management shared that elevated food and utilities prices are expected to weigh on operating profit margin in 2023F.
- In addition, Kimly still faces manpower issues stemming from:
- shortage of qualified F&B workers, and
- rising wages.
- Kimly has taken a cautious stance in adjusting food prices (given the cost-conscious nature of customers); hence, we think that margin pressure could continue into FY23F. We lower our FY23-24F segment margins further; our FY23-24F EPS is lowered by 10-13% accordingly.
- As announced in 1HFY22, Kimly intended to terminate the management agreements of 9 coffee shops; only 5 coffee shops were terminated as of end-2HFY22, with 4 more closures expected in FY23F. We expect ~-5% revenue impact on the outlet management segment from the cessation of the 9 coffee shops. Food stalls also recorded net closures of 7 stalls in FY22 due to labour shortage issues, with 7 more Rive Gauche stores expected to close in FY23F upon completion of the brand’s disposal.
- Kimly is still targeting to open 3-5 new coffee shops per year going forward. Given the uncertain climate, we now expect no net outlet openings in FY23F, resuming from FY24F onwards.
- Although we see Kimly as a potential beneficiary of downtrading behaviour, we think this will be offset by slowed outlet expansion and rising costs. Our target price for Kimly is lowered to S$0.39, still based on 15.4x CY24F P/E (0.5 standard deviation below the group’s 5-year historical mean). Reiterate HOLD rating on Kimly.
Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.
Kenneth TAN CGS-CIMB Research | ONG Khang Chuen CFA CGS-CIMB Research | https://www.cgs-cimb.com 2022-11-24 2022-11-24
Previous report by CGS-CIMB:
2022-09-09 Kimly - Divestment Of Confectionery Business
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Kimly Target Price,
Kimly Share Price History,
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