Brokers' take: CGS-CIMB says Kimly trades at attractive discount, reiterates 'add'

COFFEE shop and food court operator Kimly 1D0 : 1D0 0%is trading at an attractive discount to the privatisation valuation of its F&B peer Koufu which stands at 16 times of CGS-CIMB's estimated earnings.

The research team has reiterated its "add" call on Kimly with an unchanged target price of S$0.56. This represents a potential upside of about 34.9 per cent from the counter's last trading price of S$0.415 as at 2.51 pm on Tuesday (Jan 4). Kimly's shares were trading 2.5 per cent or S$0.01 higher at the time.

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, which is 1 standard deviation below Kimly's 5-year historial mean.

Kimly is backed by net cash of S$71 million as at end FY2021, which should contribute to a sustainable dividend yield of about 4 per cent as well as aid in the group's continued outlet expansion of about 3 outlets per year, CGS-CIMB noted.

Moreover, the Catalist-listed F&B operator will continue to benefit from the structural trend of hybrid work arrangements and growing demand for online food delivery. CGS-CIMB expects sequential earnings recovery in H1 2022 as dine-in measures ease, resulting in footfall recovery.

"Kimly is relatively immune to border tightening risks, given that its outlets are predominantly located in heartlands (about 80 per cent of all outlets), in our view," said CGS-CIMB analysts Kenneth Tan and Ong Khang Chuen.

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They believe the privatisation of F&B peer Koufu has a high likelihood of going through due to the attractive offer price of S$0.77, which is close to the company's all-time high share price since its listing in 2018.

The company's free float is also low as its founders already have a deemed interest of 77.41 per cent and only need 12.59 per cent to make a compulsory acquisition.

Koufu was trading flat at S$0.76 as at 2.51 pm on Tuesday, just S$0.01 below its privatisation offer price.

READ MORE:

• Brokers' take: DBS initiates 'buy' on Kimly, expects more acquisitions to drive earnings
• Kimly set to benefit as more work from home: CGS-CIMB
• Koufu founders make S$0.77 per share cash offer to privatise company