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What Investors Should Know About Kimly Ltd’s Historical Financial Performance and Outlook

Kimly Ltd (SGX: 1D0) prides itself on being the largest traditional coffee shop operator in Singapore with more than 25 years of experience. It has two business segments, namely, outlet management and food retail.

Under the outlet management division, Kimly operates and manages 60 coffee shops, four industrial canteens, and four food courts. As of 30 September 2017, the company had a 98% occupancy rate across nearly 500 stalls within its managed food outlets. Kimly’s food retail division has 131 food stalls in total, selling mixed vegetable rice, Teochew porridge, dim sum, and the likes.

Investors who are interested in Kimly should pay attention to its past historical performance, as well as its prospects. The past tells us how well the company has performed and could give some insights into its competitive advantages. The outlook, on the other hand, shows what investors can expect from the company going forward.

Past key financial highlights

From the financial year ended 30 September 2014 (FY2014) to FY2017, Kimly’s revenue had grown from S$148.9 million to S$192.1 million, translating to a compounded annual growth rate of 8.9%. Together with the uptick in revenue, gross profit increased from S$31.4 million in FY2014 to S$38.4 million in FY2017. The consistently increasing revenue and gross profit over the years are commendable. However, its gross profit margin has declined slightly from 21.1% to 20% during the same time frame.

The following shows how revenue, gross profit and gross profit margin have performed in the last four financial years:Source: Kimly 2017 annual report

Kimly’s bottom-line grew from S$20.1 million in FY2014 to a peak of S$24.2 million in FY2016, before tapering off to S$21.4 million in FY2017. The fall was mostly due to increased selling and distribution expenses and administrative expenses to support its upcoming business expansion. Kimly ended off the latest financial year with a net profit margin of 11.2%.

Kimly’s bottom-line trend from FY2014 to FY2017 is shown below:

Source: Kimly 2017 annual report

Kimly had a return on equity (ROE) of 29.1% in FY2017, which is one of the highest in the F&B industry. The ROE figure shows how efficient the management is in turning every dollar of shareholders’ capital into earnings.

What the future holds

Kimly is embracing new technology to stay ahead of its competitors. In its 2018 second-quarter earnings release, it said that it plans to “gradually implement cashless payment systems to its food outlets island-wide to improve operational efficiency”.

Vincent Chia, executive director of Kimly, added some light on other initiatives of the company:

“Operationally, in April 2018, the Group acquired the operating lease of a coffee shop in Tampines and will begin operations in May 2018, and will be opening our “productive” coffee shop in 3Q FY2018. We also plan to refurbish three of our coffee shop outlets to refresh the look and improve operational efficiency.

The final phase of upgrading of our new central kitchen is also on schedule to be completed in 3Q FY2018. We expect the new semi-automated central kitchen to improve work processes and maximise manpower resources to boost productivity in the long run.”

Hopefully, the various projects undertaken by Kimly will make the company more efficient and profitable than it already is.

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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 Sudhan P doesn’t own shares in any companies mentioned.