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Kimly 'attractive buy' on 5% net profit growth in FY2022 and strong cash flow generation: DBS

Felicia Tan
Felicia Tan12/3/2021 10:43 PM GMT+08  • 2 min read
Kimly 'attractive buy' on 5% net profit growth in FY2022 and strong cash flow generation: DBS
The analysts see more upside to the group’s earnings if it can deliver more acquisitions.
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DBS Group Research analyst Paul Yong and the Singapore research team have kept their “buy” recommendation on Kimly with the same target price of 50 cents.

The target price, which represents a 20% upside to the counter’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’s report on Nov 30, Kimly is trading at an “undemanding” 12 times FY2022 P/E, 0.5 standard deviation below its five-year mean of 15 times.

“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 ‘buy’,” writes Yong.

On Kimly’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’s food retail segment.

See also: OCBC’s Vasu Menon expects US Fed to raise rates by 25 bps; ‘banking crisis’ does not spell ‘gloom and doom’

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

“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,” he says.

Shares in Kimly closed 1 cent higher or 2.50% up at 41 cents on Dec 3, or an FY2022 P/B of 3.0 times and dividend yield of 4.0%.

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