RHB Group Research analyst Jarick Seet has maintained “buy” on coffeeshop operator Kimly with a raised target price of 39 cents from 34 cents.

According to Seet, the new target price represents a 15% upside with a yield of 4% for the FY2021 ending September.

Despite the restrictive measures arising from Covid-19, Kimly’s business model remains “resilient”, he says.

During the circuit breaker from April to June 2020, Kimly benefited from the surge in demand for food delivery services through various platforms, which cushioned the drop in its direct outlet sales.

However, when the country entered phase two of reopening, Kimly saw the crowds returning to its coffeeshops, while experiencing only a slight dip in its food delivery orders.

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As such, FY2020 revenue for the coffeeshop operator grew 1.2% y-o-y while PATMI expanded by 25.8% y-o-y.

While the growth may be partly attributable to government assistance, the net impact led to an increase in revenue and margins, compared to pre-Covid-19 periods.

In FY2020, food delivery orders likely accounted for 5-10% of Kimly’s revenue.

“We believe that this may be due to Kimly offering one of the most affordable options for delivery and – with the economy worsening – it presented a more sustainable option for the average family in Singapore. Also, its dining outlets are also spread well across the island – mainly near or in housing estates, which makes it convenient for consumers to opt for delivered meals,” notes Seet.

Seet also believes Kimly’s recent acquisitions may spur its growth in FY2021.

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The coffeeshop operator completed phase 2B of the acquisition involving eight food outlets, which now puts 80 food outlets and 134 food stalls under Kimly’s portfolio.

On Sept 9, 2020, Kimly separately entered into two joint ventures (JVs) with two coffeeshops in Bukit Batok and Upper Aljunied, which should “further boost profitability” for FY2021.

“We expect Kimly’s business to remain strong amidst this pandemic, and it will likely continue to reward shareholders with attractive dividends,” he says.

“Looking ahead, we expect new joint ventures and acquisitions to further boost its PATMI. This, on top of the global rally on consumer stocks, led us to raise our terminal growth rate assumption to 1% from 0%, which resulted in a higher target price,” he adds.

As at 11.55am, shares in Kimly are trading 1 cent lower or 3.0% down at 32.5 cents.