COFFEE-SHOP operator Kimly has proposed to acquire a 75 per cent stake in home-grown food business Tenderfresh for S$54 million, to be satisfied via a mix of cash and new Kimly shares to be issued to the sellers.

 

The move will provide the group an opportunity to expand into the growing halal food industry in Singapore and neighbouring countries, it said in a press statement on Tuesday.

 

Prior to the completion of the deal, the Tenderfresh business will be restructured and consolidated. A new entity will be incorporated to hold the business, which Kimly will own 75 per cent.

 

Out of the S$54 million to be paid if the deal goes through, S$38 million will be paid in cash, while S$16 million will be satisfied by the issuance of 51.2 million shares at an issue price of 31.24 Singapore cents.

 

Kimly has also granted a put option to Tenderfresh' s vendors, which in turn have granted Kimly a call option. Both the put and call options are " evergreen" and will allow Kimly to acquire the remaining 25 per cent stake in Tenderfresh five years after the completion date.

 

Founded in 1979, Tenderfresh manages 14 food concepts and 41 outlets, ranging from western fares and traditional local cuisines to food kiosks, catering, retail outlets and original equipment manufacturing (OEM).

 

It operates a 25,000 square foot central kitchen which caters to about 140 brands and outlets. The kitchen supplies semi-finished products to its own outlets.

 

" As more food and beverage operators look to outsource their food production to reliable OEM partners to reduce manpower needs, the group believes that this will generate new revenue streams," Kimly said.

 

The proposed acquisition comprises central kitchens, restaurants, kiosks, food stalls, plant and equipment, trademarks and customer relationships which operate via various entities.

 

As Tenderfresh' s central kitchen is halal-certified and its " Tenderbest" branch is " well-recognised by the Muslim community" , Kimly believes it will be able to leverage Tenderfresh' s competitive edge and wide network in the halal food market to make further headway into the industry.

 

The Singapore Halal mark and standard is also recognised by Brunei, Indonesia and Malaysia under the MABIMS agreement, Kimly said.

 

Kimly expects the proposed acquisition to complete within five months. The completion is conditional on satisfactory due diligence investigations by Kimly, the restructuring exercise being completed and no material adverse change to the operations, assets and financial condition of Tenderfresh save for the restructuring.

COFFEE shop operator Kimly on Monday posted net profit of S$21.7 million for the first six months of the year ended March, more than doubling from S$10.5 million in H1 FY2020 net profit on the back of higher revenue and improved gross margin.

 

Group revenue for the half-year period rose 14.2 per cent to S$122.6 million from S$107.4 million the previous year, as revenue contributions grew year on year across all business divisions of the group.

 

The bulk of group revenue growth for H1 came mainly from the food retail division, which saw higher contributions from existing food stalls and increased food delivery sales, as well as from new food stalls and confectionery shops opened over FY2020.

 

Cost of sales notably declined 2.2 per cent to S$82.4 million from S$84.2 million in H1 FY2020, largely due to government grants and rental relief received.

 

As such, the group' s gross profit increased 73.5 per cent on-year to S$40.3 million, with gross profit margin rising 32.9 per cent from 21.6 per cent in the same period last year.

 

Earnings per share was 1.83 Singapore cents, up from 0.92 cent a year ago.

 

Kimly has declared an interim dividend of 0.56 cent, double the 0.28 cent interim dividend announced during H1 FY2020.

 

Noting that the F& B (food and beverage) sector is " on a path of steady recovery" , Kimly in its announcement said footfall to its coffee shops, canteens and food courts has been " steadily increasing following the slow return to pre-pandemic normalcy" .

 

The group said that it will nonetheless continue taking precautions in ensuring the safety of its staff and viability of operations, as new strains of the virus have emerged in parts of Asia this year.

 

" As it is difficult to predict how long the situation in Singapore would take to normalise given the global lingering uncertainties, the group will continue seeking for opportunities available in the market to grow its revenue streams while monitoring the situation cautiously," it added.

 

KIMLY has entered into a joint venture (JV) agreement through its wholly-owned subsidiary Kimly Makan Place to manage two coffee shops in Bukit Batok and Serangoon North, the coffee shop operator said on Thursday.

 

The coffee shops are located at Block 233 Bukit Batok East Avenue 5 and Block 153A Serangoon North Avenue 1. Kimly Makan Place will manage the coffee shops under the JV with Tade Group, a private company in the business of letting and operating self-owned or leased food courts, coffee shops and eating houses.

 

Kimly Makan Place has injected working capital of S$147,000 as consideration for its 49 per cent stake in the JV company Zhen Wei Food House. Tade Group holds the other 51 per cent for a consideration of S$152,900.

 

The Kimly subsidiary also paid Tade Group lease assignment fees of S$588,000 for the Bukit Batok coffee shop and about S$1.13 million for the Serangoon North coffee shop.

 

The aggregate consideration of S$1.86 million has been paid in cash using the net proceeds from the company' s initial public offering.

 

Kimly said that the joint venture is in line with its strategy to expand its network of food outlets locally and to establish new outlets and stalls as and when strategic locations become available. This will help the group diversify and expand its revenue stream and mitigate uncertainties in the private leasing category.

 

It will continue to strengthen its market presence by opening more food stalls under its food retail division, which is complemented by its central kitchen. It will also continue to explore opportunities to acquire and/or operate more strategically located coffee shops in mature estates with established footfalls.