Deep Dive into One of the Largest Traditional Coffeeshop Operators in Singapore

Kimly Limited (“Kimly”) is one of the largest traditional coffeeshop operators in Singapore with 30 years of experience. The Group operates and manages an extensive network of 83 food outlets, 137 food stalls, 2 Tonkichi restaurants and 7 Rive Gauche Patisserie shops across the heartlands of Singapore. It also operates a Central Kitchen that supplies sauces, marinades and semi-finished food products to its food stalls.

Key Statistics

Past Financial Performance

For FY2020, Kimly’s revenue grew by a mere 1.19% year-on-year to S$210.77 million. The slightly higher revenue can be attributed to:

• Higher revenue contribution from Food Retail Division as a result of an increase in food delivery sales. In addition, heightened food delivery demand during Circuit Breaker period further drove up food delivery sales.
• Revenue contribution from the Group's newly diversified Outlet Investment Business Division.

Despite the low single digit revenue growth, Kimly’s profit after tax jumped by 25.79% year-on-year to S$25.22 million, mainly due to lower cost of sales.

For its trailing 12 month financial performance, Kimly’s revenue grew by 7.24% to S$226.03 million. The higher revenue can be seen from all 3 business divisions:

• Food Retail Division
• Outlet Investment Business Division
• Outlet Management Division

With the further reduction in cost of sales and other operating expenses, Kimly’s profit after tax grew by 44.51% to S$36.45 million.

Ownership

The largest shareholder for Kimly belongs to Executive Chairman Mr. Lim Hee Liat, who has a 41.20% stake in the firm. As a founding shareholder of the Group, he has more than 30 years of experience in the coffeeshop and F&B industry.

He oversees the overall development and performance of the Group, setting and executing strategic directions as well as expansion plans.

The 2nd largest shareholder for Kimly belongs to Mr. Peh Oon Kee, who has a 8.28% stake in the Group. Mr. Peh is one of the founding shareholders for the Group but currently does not have any executive position in Kimly.

Consensus Estimates

Based on the analyst consensus estimates, Kimly has a “Buy” recommendation with a mean target price of S$0.47. This translates into a potential upside of 23.68% based on the share price of S$0.38.

Over the 6 months, with the gradual re-opening and more dine-in options, analysts have re-rated Kimly’s target price by 25.33% and has increased their forecasted revenue and profit by 1.55% and 49.14%. This shows that analysts are positive about the outlook and prospects for Kimly.

Latest Corporate Development – Acquired 75% Stake in TenderFresh

Back in May 2021, Kimly has forked out S$54 million for a 75% stake in TenderFresh, which is a homegrown food business founded in 1979.

Kimly has mentioned the various rationale from this transaction, mainly:

• Provides an opportunity for the Group to expand into the rapidly growing Halal food industry not only in Singapore but potentially also in neighbouring countries.
• Help diversify Kimly’s revenue streams and add a new food division to the Group’s existing units.
• Massive synergies to be unlocked with opportunities to cross-sell, enhance product offerings and streamline processes to save costs.

The Directors of the Group added:

“With the acquisition of 75% stake in Tenderfresh Business, we are confident that this will further boost the resilience of our operations and revenue and have a positive impact on our earnings going forward which will enhance shareholder value.

Moving forward, we will continue seeking opportunities to acquire food outlets in the heartlands of Singapore with a large catchment of population to deepen our market presence, expand our customer base as well as product offerings.”

Technical Analysis for Kimly

Based on the weekly chart for Kimly, its share price has been on a rising trend since September 2020. This can be seen from the various candlesticks trading near or above the upper limit of the Bollinger Band, coupled with high buying volume, as seen from the volume bar chart.

This trend went on until February 2021, where its share price started to fall back and breached the 20-Day Moving Average in March 2021. However, its MACD line is still above zero at that time, which indicates that the uptrend is still intact.

Coupled with the TenderFresh’s acquisition, Kimly’s share price continued to march on in May 2021 and trade above the upper limit of the Bollinger Band.

Subsequently, with the Relative Strength Index (“RSI”) at overbought territory, its share price started to fall back and has since recovered to above the 20-Day Moving Average.

With that, investors will have to take note of whether Kimly’s share price will fall below the 20-Day Moving Average, as this could indicate further weakness in the share price.

Conclusion & Management Outlook

To conclude, Kimly’s financial performance has been resilient amid the COVID-19 pandemic and is set to have another leg of growth once the majority stake in TenderFresh takes place. Analysts are also bullish on the prospects of Kimly, given the positive consensus estimates.

In terms of management outlook, Kimly mentioned that they will continue taking precautions in ensuring the safety of its staff and viability of operations as new strains of the virus have emerged in some parts of Asia this year.

Furthermore, despite the lingering uncertainties, the Group aims to continue seeking opportunities available in the market to grow its revenue streams while monitoring the situation cautiously.

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