Kimly Ltd (SGX: 1D0) is the largest traditional coffee shop operator in Singapore. It currently runs a chain of 68 food outlets and 129 food stalls island-wide under various brands.
The company made its trading debut on Singapore’s stock market on 20 March 2017, and closed at a price of S$0.44 per share, 76% higher than its listing price of S$0.25. But since then, Kimly’s stock price has been steadily drifting lower. Right now, the coffee shop operator’s shares are trading at S$0.355 each, some 19% lower than the closing price on its trading debut.
This situation may cause investors to wonder: Is Kimly a bargain now? Unfortunately, there is no easy answer. But, we can still get some insight by comparing Kimly’s current valuations with the market’s. The three valuation metrics I will focus on are the price-to-book (PB) ratio, price-to-earnings (PE) ratio, and dividend yield.
I will be using the SPDR STI ETF (SGX: ES3) as a proxy for the market; the SPDR STI ETF is an exchange-traded fund that tracks the fundamentals of Singapore’s stock market benchmark, the Straits Times Index (SGX: ^STI).
Kimly currently has a PB ratio of 5.6 times, which is significantly higher than the SPDR STI ETF’s PB ratio of 1.3. The dynamic with the PE ratio is also similar. The coffee shop operator has a PE ratio of 17.7, which is 59% higher than the SPDR STI ETF’s earnings multiple of 11.1.
But coming to the dividend yield, Kimly outshines the SPDR STI ETF; the company has a yield of 3.8% while the market has a yield of 2.93%. (The higher a stock’s yield is, the lower is its valuation.)
Putting it all together, we can argue that Kimly is probably not trading at a bargain price, given its higher PB and PE ratios.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.