RHB ups Kimly's TP to 46 cents on strong FY2021 results; CAD case no longer overhang factor

As at 12.01pm, shares in Kimly are trading 0.5 cent lower or 1.22% down at 40.5 cents.

RHB Group Research analyst Jarick Seet has kept “buy” on Kimly with a higher target price of 46 cents from 42 cents previously.

The buoyant outlook is based on Kimly’s strong FY2021 results, where its total revenue grew 13.2% y-o-y to $238.6 million. Its PATMI stood 55.7% higher y-o-y at $39.3 million. Kimly’s FY2021 ended on Sept 30, 2021.

“Going forward, with the Tenderfresh acquisition, its bottomline and profitability should increase further. We expect the company to continue expanding organically, by opening more outlets and refurbishing existing ones,” writes Seet in a Jan 18 report.

In addition, Seet sees the group’s commercial affairs department (CAD) case no longer being an overhang factor.

On Nov 11, 2021, Kimly’s executive chairman Lim Hee Liat and executive director Chia Cher Khiang were charged by the CAD in relation to Kimly’s failure to notify the Singapore Exchange (SGX) that its acquisition of Asian Story Corporation was an interested person transaction.

Lim also faced a separate charge in which he failed to disclose that Asian Story Corporation was a company that was partially beneficially owned by him.

While the case is ongoing, Kimly’s management has “proactively reshuffled positions and duties of the team members to address this issue”, notes Seet.

Moving forward, the eventual closure of the CAD case will be positive for Kimly in the long term.

“This will finally remove the overhang factor and enable management to move forward with its growth strategy,” reckons Seet.

“Lim, the majority shareholder of the company, will likely continue to benefit the group with his expertise and experience. Compared with the recent privatisation of Koufu at 16 times FY2022 price to earnings (P/E), Kimly is trading at a much lower valuation,” he adds.

“Using our in-house proprietary methodology, we maintain our ESG score at 2.4, due to a lower governance rating, and apply a 12% discount to our discounted cashflow (DCF)-based value of 52 cents to arrive at a lower target price of 46 cents,” Seet continues.

On Jan 4, CGS-CIMB Research called Kimly a prime heartlands gem after Koufu announced its intent to go private and delist on Dec 29, 2021.

As at 12.01pm, shares in Kimly are trading 0.5 cent lower or 1.22% down at 40.5 cents, or 3.2 times FY2022 P/B and an FY2022 dividend yield of 5.4%.

Photo: Albert Chua/The Edge Singapore

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