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UOB Kay Hian on Tuesday issued a buy call on coffeeshop operator Kimly Limited (Kimly) with a target price of S$0.46.
The investment banking firm upgraded Kimly from "hold" to "buy" on valuation grounds as its stock price has pulled back 15 per cent since their "hold" valuation in May 2017. At current levels, the stock is trading at a forecasted PE (price-earnings) ratio of 19.7 times for FY17, a 9 per cent discount to peers, and a forecasted ex-cash PE ratio of 16.2 times.
According to UOB Kay Hian, Kimly has a strong cash position and a clean balance sheet. As at June 30, 2017, the group had a cash balance of S$76.6 million, compared to S$37.1 million a year ago.
UOB Kay Hian added that potential mergers and acquisitions (M&As) may drive Kimly's next stage of growth. While near-term growth may be relatively muted, there are opportunities for growth through potential acquisitions, which will likely drive the group's earnings in FY18-19.
Compared with a year ago, the group has added a total of three new coffee shops, as well as 13 food retail stalls.
As at 12.30pm, Kimly Limited which launched its Catalist IPO (initial public offering) on the Singapore Exchange on March 20, was trading at S$0.375, unchanged from its previous day close.