A WHOLLY owned Singapore subsidiary of Catalist-listed Kimly on Friday (Sep 9) agreed to sell its confectionery business Rive Gauche Pâ tisserie to Muginoho Global for a consideration of S$2.8 million.

 

Rive Gauche Pâ tisserie operates western pastry and confectionery specialty shops, including through online platforms. Muginoho Global is engaged in the manufacturing and sale of food products and is wholly owned by Japan-based Muginoho Holdings.

 

Kimly said the disposal will streamline its business operations and better direct resources to its core business of operating coffeeshops, including the opening of more outlets and diversifying its product offerings.

 

The assets of the confectionery business had a book value of S$218,804, based on the audited accounts of Kimly subsidiary Kimly Food Products, for the financial year ended Sep 30, 2021. The net profit attributable to the assets for FY2021 was S$424,044.

 

In addition to the purchase price, Muginoho Global will pay Kimly Food Products a cash amount equivalent to the aggregate daily cash float of the confectionery business, and the existing security deposits held with the landlords of premises leased by Kimly Food Products.

 

Kimly said S$1.8 million will be placed in escrow and disbursed according to payment milestones, based on regulatory approvals for the transfer of licences.

KIMLY Makan Place (KMP), a wholly-owned unit of Catalist-listed Kimly : 1D0 0%, has entered a joint venture with a fellow food court specialist to operate and manage an HDB coffeeshop lease at Kitchener Complex on 808 French Road.

 

The joint venture is with 808 Ta Sun, which runs food courts, coffeeshops and eating houses, and is solely owned by Singaporean Tang Hwee Fong.

 

The joint-venture company, Da Sun Food House, will be 49 per cent owned by KMP, while the remainder is held by 808 Ta Sun. KMP paid S$147,000 for its stake, as well as a S$980,000 lease assignment fee, adding to a total consideration of S$1.13 million fulfilled in cash.

 

The joint-venture company will enter a service agreement with KMP, which will operate and manage the coffeeshop. Da Sun Food House will have 2 directors, with 1 director each nominated by KMP and 808 Ta Sun. The chairman of Da Sun Food House&rsquo s board will be appointed solely by KMP.

 

The deal is in line with Kimly&rsquo s strategy to expand its network of food outlets in Singapore and establish new outlets as and when suitable strategic locations become available, the company said.

 

&ldquo The group will be able to diversify and expand its revenue stream through additional and recurrent rental streams, which mitigate the uncertainties in the private leasing category,&rdquo it added.

 

Kimly expects to open more food stalls under its food retail division, complemented by its central kitchen. The company said it will continue to explore opportunities to acquire or operate more strategically-located coffeeshops in mature estates with established footfalls.

 

UOB Kay Hian analysts Llelleythan Tan and John Cheong are keeping their &ldquo hold&rdquo recommendation on Kimly after the coffeeshop operator posted &ldquo underwhelming results&rdquo although within their expectations for the 1HFY2022 ended March.

 

&ldquo We see limited upside at current levels, coupled with the absence of any near-term catalysts,&rdquo Tan and Cheong write in their June 13 report.

 

For the half-year period, Kimly&rsquo s PATMI fell 14.7% y-o-y to $18.5 million, forming 58.5% of Tan and Cheong&rsquo s full-year estimates.

 

The underperformance was mainly due to higher operating costs, which put Kimly&rsquo s margins under pressure.

 

The company&rsquo s operating business segments also saw weaker performance on the back of lower footfall and the restricted number of diners due to Covid-19 restrictions.

 

Lifting of Covid-19 measures may soften footfall lower target price

 

The way the analysts see it, the lifting of most social distancing measures including 100% of workers being allowed to return to their workplaces, may soften the footfall for Kimly&rsquo s coffee shops as most of them are located in the heartlands.

 

That said, the removal of the dine-in group size limits may mitigate the impact of the removal of the work-from-home (WFH) default.

 

In addition to their &ldquo hold&rdquo call, Tan and Cheong have lowered their target price on the counter to 37 cents from 38 cents previously. The new target price is based on an FY2022 P/E of 15.0x, down from the previous valuation of an FY2022 P/E of 16.0x.

 

The lower target price is based on the analysts&rsquo lower FY2022 estimates as well.

 

To this end, Tan and Cheong have also lowered their PATMI forecasts for the FY2022, FY2023 and FY2024 by 3.1%, 1.4% and 2.5% respectively to $30.9 million, $33.7 million and $36.7 million.

 

The lower forecasts stem from the higher operating costs and lower revenue growth assumptions.

 

Major earnings-accretive acquisitions key re-rating catalyst

 

&ldquo Currently trading (15.5x FY22F PE) near its average mean P/E, we reckon that potential upside is capped at current price levels, barring any new acquisitions. We think that a key re-rating catalyst would be future major earnings-accretive acquisitions,&rdquo Tan and Cheong write.

 

Better-than-expected contributions from its coffee shops are another catalyst to Kimly&rsquo s share price, they add.

CGS-CIMB on Friday (May 13) has downgraded its call on coffeeshop operator Kimly Group to &ldquo hold&rdquo from &ldquo add&rdquo , as Singapore&rsquo s reopening will likely impact footfall as workers start to return to office.

 

The research team lowered its target price to S$0.41 from S$0.54. The new target price is pegged to 15.4 times CGS-CIMB&rsquo s estimates for FY2023 earnings, down from 16.8 times previously to account for the group&rsquo s slowing growth prospects.

 

The target price also implies a potential upside of 6.5 per cent from Kimly&rsquo s share price. The counter was trading at S$0.385 as at the midday break on Friday, up S$0.005 or 1.3 per cent.

 

With working from home no longer the default, CGS-CIMB believes that Kimly will experience lower footfall since the bulk of Kimly&rsquo s outlets are located in residential heartlands.

 

However, the brokerage said the drop in traffic could be cushioned partially by rising inflation, as consumers move towards mass-market dining options.

 

The removal of dine-in group size limits should also benefit zichar and drink store sales.

 

The research team lowered its estimates for Kimly&rsquo s FY2022 earnings per share (EPS) by 8.7 per cent to factor in further margin compression from rising food costs, staff expenses and utilities expenses in H1.

 

&ldquo While pricing adjustments have been made in Q2, we think those could be insufficient to cover the continued cost elevation in recent months,&rdquo said CGS-CIMB.

 

The research team also lowered its EPS estimates by 16.8 per cent in FY2023 and 13 per cent in FY2024, to reflect lower store count assumptions, after the operator closed 12 underperforming food stalls.

 

Additionally, CGS-CIMB noted that Kimly is terminating the management agreements of 9 coffee shops under a third-party brand around the second half of 2022, which may hit revenue of its outlet management segment by about 5 per cent in FY2023.

 

The coffeeshop operator on Wednesday posted a net profit of S$18.5 million for its first half ended March, declining 14.7 per cent year on year. The decline comes despite its revenue increasing by 27.9 per cent to S$156.9 million, as revenue contributions in some segments fell and cost of sales increased in H1 2022.

COFFEE shop operator Kimly : 1D0 0% on Wednesday (May 11) posted a net profit of S$18.5 million for the first six months of the year ended March, declining 14.7 per cent from S$20.7 million net profit previously recorded in H1 FY2021.

 

The decline comes despite its revenue increasing by 27.9 per cent to S$156.9 million from S$122.6 million previously, as revenue contributions in some segments fell and cost of sales increased in H1 2022.

 

Nevertheless, the group declared an unchanged interim dividend amount of 0.56 Singapore cent, which will be paid on or around Jul 15, 2022. 

 

The bulk of group revenue growth for H1 2022 came mainly from the food retail division, which increased to S$96.7 million from S$59.9 million previously, owing to revenue contributions from the newly acquired Tenderfresh Business in October 2021.

 

However, there were lower revenue contributions following the closure of 12 underperforming food stalls, mainly on the back of a manpower shortage. The outlet management division and outlet investment business division also recorded falls in revenue contribution attributable to the decrease in sale of beverages and tobacco products, arising from lower footfall at most of the group&rsquo s coffeeshops due to Covid-19 restrictions.

 

Cost of sales notably increased to S$109.1 million from S$82.4 million previously, driven by lower government grants, higher utilities charges (in line with the rise in electricity tariffs), higher employee benefits by Klovex in providing cleaning services, and an increase in the depreciation of right-of-use assets.

 

The group&rsquo s gross profit increased to S$47.8 million from S$40.3 million, and gross profit margin fell to 30.4 per cent from 32.9 per cent.

 

Earnings per share was 1.49 Singapore cents, down from 1.83 cent a year ago.

 

&ldquo We believe that the corporate developments in FY2021 have laid a strong foundation for the group to grow, as well as equip the group with more capabilities to better serve our customers,&rdquo the directors of Kimly said.

 

The group said it will focus on carrying out its 4-pronged growth strategy:

 

Driving growth, which includes expanding its footprint

Diversifying its product offerings and revenue channels

Expanding its food retail division and

Strengthening its operation capabilities to improve efficiency and productivity.

Jane Zhang  |    March 24, 2022, 12:55 PM

 

The current ban on sale and consumption of alcohol at food and beverage (F& B) establishments after 10:30pm will be lifted from Mar. 29.

Agencies are also looking into the resumption of nightlife activities, announced Minister for Finance and co-chair of the Multi-Ministry Taskforce Lawrence Wong on Thursday (Mar. 24).

 

Lifting of alcohol restrictions, nightlife resumption being discussed

 

Currently, the sale and consumption of alcohol in F& B establishments are  not allowed  after 10:30pm.

This restriction will be lifted from Mar. 29.

The following activities will also be allowed to resume from Mar. 29:

 

 

 

 

 

 

 

 

 

 

 

• Live performances at all venues, including F& B establishments
• The screening of live broadcast programmes at such establishments
• Outdoor live performances and busking
• Large-scale social gatherings and events such as gala dinners, corporate Dinner & Dance (D& D) events, birthday celebrations, and anniversaries

 

Large-scale gatherings will need to comply with existing safe management measures, such as not having more than  10 people  per table and safe distancing of one metre.

All participants will be encouraged to " exercise prudence and self-restraint" and to limit their interactions to the group they are seated with, Wong said.

 

 

 

Agencies looking into nightlife resumption

 

As for other nightlife activities such as bars, pubs, karaoke establishments, and nightclubs, Wong said that the relevant government agencies are still looking into the resumption of activities in these areas.

" These are activities with higher risk of transmission, and it is also generally more difficult to comply with the prevailing [safe management measures] in these settings," Wong said.

The agencies will provide an update on the reopening of the nightlife sector in the coming weeks.

 

Mass singing allowed as long as masks on

 

Wong also announced that the restrictions on group vocalisation activities such as mass singing will be eased now that Singapore is " in a different position" .

Congregational singing, audience and participation cheering, and singing in general settings such as in schools will be allowed, as long as masks are worn throughout.

Responding to a media question from  Lianhe Zaobao  about whether mask-on singing in karaoke outlets will be allowed to resume, Wong said KTVs are part of the nightlife sector, which the government has not yet decided what to do about.

He stated that mask-on singing in a community centre or a school, for example, will be allowed to resume on Mar. 29.

However, in nightlife environments &mdash such as karaoke establishments with a public entertainment license &mdash there is a higher risk of transmission as well as " generally more difficulty complying" with safe management measures.

 

" That' s why, as I mentioned just now, we are studying that. We would like to see the reopening of this sector.

As I mentioned, it comprises of bars, pubs, nightclubs, as well as karaoke establishments, all with a public entertainment license. And for this segment, we are studying and we will announce later the plans for reopening of these establishments."

 

 

 

KIMLY $ Kimly: 1D0 0% Limited and its convicted consultants have mutually decided not to carry on with the recent engagement of the duo, following feedback and concerns from its stakeholders, the Catalist-listed operator of coffeeshops said.

 

In its regulatory statement it furnished on Saturday (Mar 12), Kimly said: " The board is grateful for and takes these feedback and concerns seriously, and will further evaluate and consider the matter together with its professional advisers, engage appropriately with stakeholders as well as take additional guidance from its sponsor and regulators."

 

Kimly had in its statement furnished on Mar 2 announced the engagement of former executive chairman Lim Hee Liat and former executive director Chia Cher Khiang as independent consultants, shortly after the duo were convicted of and fined in mid-February for breaching the Securities and Futures Act.

 

Kimly noted that Lim and Chia' s shareholdings in the company amounted to 41.3 per cent, and that their interests are " aligned" with other shareholders in ensuring the group continues to perform well operationally and financially.

 

It stated that its shares traded 54 per cent higher at S$0.385 on Mar 11 than its initial public offering of S$0.25 in 2017. It recorded interim, special and final year dividends totalling S$0.0644 per share or 25.8 per cent of the investment as at the flotation.

 

Lim and Chia were convicted for not notifying the Singapore Exchange that Kimly' s 2018 acquisition of drinks company Asian Story Corporation (ASC) was an interested person transaction. They were fined S$150,000 and S$100,000 respectively. Also, Lim was charged for failing to disclose that ASC was a company which was partially beneficially owned by him.

 

They were also disqualified from directorship for 5 years after pleading guilty to offences under the Securities and Futures Act.

Kimly' s ex-directors, fined for offences, hired as consultants to the company
 

TWO former directors of Kimly have been engaged as independent consultants to the company after being fined by the State Courts and disqualified from serving as directors in companies for 5 years.

 

Lim Hee Liat, the company' s former executive chairman and Chia Cher Khiang, its former executive director, were fined S$150,000 and S$100,000 respectively last month for offences under the Securities and Futures Act. Lim was further charged under the Companies Act, with the charges relating to the 2018 acquisition of drinks company Asian Story Corporation.

 

The coffeeshop operator said in a filing on Wednesday evening (Mar 2) that it aims to leverage the collective 50 years of experience, knowledge, market intelligence and relationships between the two former directors. Lim and Chia will be engaged to provide advisory and consultancy on:

 

* Developing business strategies in the expansion of Kimly' s coffee shop segment

 

* Assessing Kimly' s stability, sustainability, resilience and growth areas

 

*Improving integration, synergies and cost efficiency of Kimly' s business, partnerships and new outlets

 

* Streamlining operations with centralised functions such as central kitchen and procurement

 

* Identifying and introducing business opportunities.

 

The pair will be paid by the hour at rates that factor in their seniority, experience, track record and credentials. Kimly has engaged human resource consultancy Willis Towers Watson to provide a proposal on appropriate fee benchmarking and incentives.

 

" As independent consultants, they will perform their services under the supervision of the management of the group, which will in turn report and provide updates on a periodic basis to the board, including appraisal and achievements of performance targets, timelines and milestones which may be set," said Kimly.

 

The nominating committee has approved the engagement of Lim and Chia on the grounds of their personal interactions with and observations of the duo. Other salient factors include Lim and Chia' s remorse and regret at their misjudgement, their conduct, commitment and co-operation since, and the effort to minimise the impact of their actions on the company.

RHB on Tuesday (Jan 18) raised its target price for Kimly to S$0.46 from S$0.42 and maintained its " buy" call on the coffee shop operator.

 

This comes on the back of Kimly' s strong FY2021 results and its S$54 million acquisition of home-grown food business Tenderfresh, announced in May last year.

 

The group' s FY2021 revenue grew 13.2 per cent on the year, while its profit after tax and minority interests surged by 55.7 per cent - a " testament to the business' s resilience" , said RHB analyst Jarick Seet.

 

Moreover, Kimly' s Commercial Affairs Department (CAD) case is no longer an overhang factor as the management had reshuffled the positions and duties of its team members to address the issue, even as the case is ongoing. The eventual closure of the CAD case will allow management to move forward with its growth strategy, Seet added.

 

That being said, due to a lower governance rating, RHB' s research team has applied a 12 per cent discount to its discounted cash flow-based value of S$0.52 on Kimly, resulting in the S$0.46 target price.

 

This new target price of S$0.46 implies a potential upside of 12.2 per cent from the counter&rsquo s Tuesday closing price of S$0.41, which was flat on the day before.

 

" We expect the company to continue expanding organically, by opening more outlets and refurbishing existing ones," Seet noted.

 

Kimly is also trading at a much lower valuation compared to peer Koufu, which is trading at price-to-earnings ratio of 16 times following its proposed privatisation - a point echoed by other analysts.

 

Earlier this month, CGS-CIMB said Koufu' s privatisation offer is a positive to Kimly, which is trading at an " undemanding valuation" of about 13 times the research team' s earnings estimates for the 2022 calendar year.

 

In an initiation report on Nov 18, DBS Group Research analyst Paul Yong said he sees Kimly as " an attractive buy" due to its undemanding valuations and decent FY2022 yield estimate of 4.7 per cent.

DBS Group Research analyst Paul Yong and the Singapore research team have kept their &ldquo buy&rdquo recommendation on Kimly with the same target price of 50 cents.

The target price, which represents a 20% upside to the counter&rsquo s last-traded price of 41.5 cents as at Nov 29, is pegged to a 15 times FY2022 price-to-earnings (P/E) ratio, which is its five-year average.

 

As at Yong&rsquo s report on Nov 30, Kimly is trading at an &ldquo undemanding&rdquo 12 times FY2022 P/E, 0.5 standard deviation below its five-year mean of 15 times.

&ldquo With 5%/8% net profit growth in FY2022/FY2023 as well as strong cash flow generation supporting a decent yield of 4.0% in FY2022, we see Kimly as an attractive &lsquo buy&rsquo ,&rdquo writes Yong.

On Kimly&rsquo s latest 75% acquisition of Tenderfresh, Yong sees positives in the move as synergies from the acquisition include cross-selling and streamlining of processes.

As such, he has projected a 30% revenue compound annual growth rate (CAGR) in FY2021 to FY2023 for Kimly&rsquo s food retail segment.

To this end, Yong believes more acquisitions by the group could drive further upside to its earnings.

&ldquo 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,&rdquo he says.

 

COFFEE shop and food court operator Kimly reported a 55.7 per cent growth in net profit to S$39.3 million for the full year ended Sep 30, 2021.

 

This comes on the back of an increase in revenue across the board, up 13.2 per cent to S$238.6 million, the group said in a bourse filing on Thursday (Nov 25).

 

The group has proposed a final dividend of 0.84 Singapore cents per share and a special dividend of 0.6 Singapore cents per share.

 

Taking into consideration the 0.56 Singapore cents per share interim dividend paid in July 2021, the total dividend declared for FY2021 stands at 2 Singapore cents per share.

 

Kimly' s food retail division contributed the most to the group' s revenue growth, logging a S$15 million increase to S$119.4 million for the year. This was due mainly to higher revenue contributions from existing stalls, growth in food delivery sales, and contributions from 6 new food stalls and 1 new confectionary shop.

 

Its outlet management division saw revenue go up S$9.2 million to S$112.5 million due to contributions from 3 new coffee shops and overall improvement in footfall.

 

Revenue from its outlet investment business division more than doubled from S$3.1 million to S$6.8 million, mainly due to the sale of beverages and tobacco products, rental income, and cleaning and utilities services provided to food outlet properties acquired in the second half of FY2020.

 

Cost of sales grew at a much slower pace than revenue mainly due to government grants and rental rebates, the group said. Cost of sales as a percentage of revenue fell from 73.2 per cent in FY2020 to 67.2 per cent in FY2021.

 

Selling and distribution expenses went up S$2.6 million to S$10.2 million due to higher online food delivery fees and an increase in packaging materials used. The group also registered a S$4.1 million increase in administration expenses, primarily due to higher spending on employee benefits.

 

Kimly' s directors said the group is committed to expanding its network of food outlets across Singapore through joint ventures and acquisitions. They cited the recent acquisition of a 75 per cent stake in Tenderfresh as a demonstration of this strategy.

 

" This strategy is expected to further strengthen our revenue base for future growth and enhance our shareholders' value. While there is still uncertainty from the ongoing pandemic, we will continue to monitor the situation closely and prepare ourselves in a strong way for the post-pandemic environment," they said in a press release.

 

The directors also noted growing demand from the food delivery business.

 

" Through the integration of new technologies for the upgrade of our central kitchen, we are confident to improve the productivity and reduce the reliance on manpower. We will continue to strengthen our income base by enhancing our food offerings and operational efficiency for greater customer and shareholder value," they said.