Listed in March 2017, Kimly Ltd (SGX:1D0) is one of the largest traditional coffee shop operators in Singapore. The company runs a network of 67 food outlets and 129 food stalls.
Recently, I did a simple screen on Singapore’s stock market and found that Kimly’s shares had the lowest price-to-earnings (PE) ratio among the top 10 restaurant operators in Singapore. Kimly made news last November when its executive chairman and executive director were revealed to be investigated by the Monetary Authority of Singapore and the Commercial Affairs Department because the duo were suspected to have flouted the Securities and Future Act. In early December, Kimly announced that no formal charges have been made against its two key leaders in question.
In any case, Kimly’s low valuation got me interested and I dug a little deeper into the company. Here are three interesting things I found from the company’s FY2018 (financial year ended 30 September 2018) annual report.
Although Kimly is keen to maintain the heritage of a traditional coffee shop that provides affordable food, it has also found ways to modernise its operations to keep up with the times and changing consumer preferences.
For instance, one of the coffee shops that Kimly operates has been outfitted with a tray return station and conveyor belts that facilitate the return of trays. To encourage tray-returns, a QR code printer will print a QR code receipt for each tray returned that rewards customers with a 10 cent rebate for their next purchase. There is also a self-service kiosk and a separate conveyor belt to assist in the serving of food.
In addition, Kimly is collaborating with NETS on cashless payments; the latter has an initiative for selected retailers to pilot cashless payment solutions. To this end, Kimly has introduced NETS QR code payment options at some of its food outlets and is looking to gradually implement cashless payment options at its outlets islandwide.
Expanding its business
Kimly acquired Tonkichi and Rive Gauche Patisserie from Sapporo Lion Pte Ltd in FY2018. The acquisitions expand the company’s product offering beyond its traditional coffee shop business. Tonkichi is a Japanese restaurant chain serving tonkatsu dishes and has two outlets in Singapore. Rive Gauche Patisserie is a bakery chain with nine outlets in Singapore.
Although Kimly’s expertise clearly lies in its core coffee shop business, expanding into full-service restaurants and bakeries will diversify its revenue stream.
If successful, the company can also leverage on the two brands to expand its network.
Cash is king
With the funds raised through its initial public offering (IPO), Kimly is in a strong financial position. As of 30 September 2018, the company had a cash pile of S$71.7 million and zero debt.
In FY2018, Kimly also generated S$27.7 million in cash from operations before working capital changes. After changes in working capital (the bulk of which was an increase in trade and other receivables), cash flow from operations was still a healthy S$7.2 million.
The Foolish bottom line
At the time of writing, Kimly’s share price is S$0.24. At this price, the company has a PE ratio of 12.7 and a dividend yield of 4.0%. Based on its low valuation, attractive yield, strong cash position, and consistent track record, Kimly could be worth taking a deeper look into by investors.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore contributor Jeremy Chia does not own shares in any company mentioned.