Expiry:
Target Price
$0.18
(-29.41%)
NOW:

$Kimly(1D0.SI)
- P/E high at 13.7x, go to 10x for estimation
- Lackluster growth (FY2018 sales and profits see mere 5.3% and 2.1% yoy growth)
- Slew of bad news (Kimly Exe Chairman Lim Hee Liat and Exe director Chia Cher Khiang under investigation by the MAS & CAD.
- Backing off from Asian Story's acquisitions bcos Pokka intends to cut the outsourcing manufacturing for them.
- Cost pressures on labour, food cost, rental cost and expansion cost
- No competitive moat (you only go there for convenience sake)

Check out other stocks here: http://bit.ly/InvestorsExchange

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6 likes
19 comments
CoryLogics

Management Integrity is very important to retailer which are already disadvantaged to insiders.

lbs

Firstly, you want to know if the management is honest. There is 101 ways for management to siphon money.
If the directors are proven dishonest, no amount of investment will make sense.

Secondly, if the directors are indeed honest, you want to check if you are overpaying for an investment. It seems like this company is able to generate around 20m of free cash flow. It is now priced at 280m

I think even without the prospect of growth, I would hesitate to call this an overpriced investment, although not a screaming bargain.

BTW, since when is a PE of 13.7 consider high? :|

cullypok

Reply to @lbs : With two of its most senior management staff under CAD and MAS probe, barely a year after IPO, it’s naivety or sheer stupidity at best. i wouldn’t touch it with a 10 foot pole, 13.7x PE or not.

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simonloo

Unless they can show they have "clean" up this mess, it would be rather hard to believe such things do not repeat again. I won't invest in kimly but i may trade in it.

SSJ4

1 way street

cullypok

Reply to @SSJ4 : Justifiably so

cullypok

Barely a year post IPO and already it’s senior mgt under CAD probe. Regardless of financials, this kind of company stay clear la, warrau ehhh....

GrowthInvestor

barring the recent bad news, the financials actually very strong in SGX, the ratios and margins even better than many of the SG blue-chips https://www2.sgx.com/securities/stock-scre... Mgmt also looking out for growth opportunities and cost controls. With the large cash hoard, it is able to do M&A or increase dividends.

Smallcapasia

Reply to @GrowthInvestor : Agree on the strong financial position. But the 1st acquisition ends up in doldrums, and i don't see many complementary targets for them if it comes to M&A.

losemoneyinvestor

No competitive moat?
Can elaborate further?

losemoneyinvestor

Reply to @Smallcapasia : Can't believe you just said that. Lol good luck

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Recommended & Related Posts

Kopi Anyone? A Look Into 3 Listed F&B Companies in Singapore
- Original Post from Smallcapasia

I am a big fan of Singapore local Kopi (coffee) and will never give up one in exchange for any imported coffee. You will always find good locally made coffee in these 3 listed F&B companies discussed below.


As Peter Lynch has famously once said:


“Getting the story on a company is a lot easier if you understand the basic business. That’s why I’d rather invest in pantry hose than in communications satellites, or in motel chains than in fiber optics”


The local F&B retail space is currently facing headwinds from increasing human labor costs and rental. Yet in bad times or economic down turn, it provides a good defensive investment as consumers till have to eat regardless of good or bad times.


Don’t say Bojio…. check out below for 3 F&B companies (we showcase the company profiles and dive deeper into their numbers):


#1 $BreadTalk Grp(CTN.SI)



Most people especially the Singaporean locals will know about Breaktalk which is especially well known for its pork floss buns.


It operates 3 main business segments – bakery, food court and the restaurant. Their brand portfolio consists Breadtalk for Bakery, the Food Republic for food court and include famous franchise rights for the restaurants below e.g.



  • Song Fa Ba Kut Teh

  • Michelin star-rated Din Tai Feng

  • Toastbox etc


The company derives most of its revenue from Singapore but also from China, Hong Kong and the rest of the world.


#2 $Kimly(1D0.SI)



Kimly manages a network of coffeeshops, food courts and food stalls all over Singapore. Kimly’s first coffee shop opened in Yishun in 1990.


As of today, the company manages 55 coffee shops and 3 industrial canteens all over Singapore and comprises over 400 stalls. The company will lease the coffee shops from HDB or owners and will in turn subletting to other tenants i.e. the stall owners.


Kimly also owns Tonkatsu specialty restaurant – Tonkichi that serve good Japanese food at good prices. The company also serves Japanese and French style cakes and pastries – Rive Gauche.


Important note: Recently, the company got into trouble as 2 of its board members (Executive Chairman and Executive Director) get arrested by CAD and released on bail due to its IPO and its acquisition of drinks maker Asian Story Corp (ASC).



#3 $Koufu(VL6.SI)



Koufu Group Ltd is one of the most established and largest operators and managers of food courts and coffee shops in Singapore, with diversified revenue streams from outlet and mall management and F&B retail business segments.


Their Food Courts brand include Koufu, Cookhouse and Rasapura etc. Self operated F&B stalls include 1983 Coffee & Toasts, Hungry Jack and Fu Ji etc. They also run Quick Service Restaurants or Kiosks e.g. R&B Tea.


Koufu went IPO on 18 July 2018 at 63 cents. The IPO comprises a placement tranche of 90.7 million shares and a public offer of 6.3 million shares.



Putting Everything Together


Valuation Analysis





























Breaktalk Kimly Ltd Koufu Group Ltd
Price to Earning Ratio 32.26 12.93 16.08
Price to Book Ratio 3.666 3.19 4.31
Market Capitalization (S$) 490.051M 282.95M 394.166M

Among the 3 companies, Kimly Ltd has the smallest market capitalization with the cheapest valuation.


However, Kimly’s share price upside might be capped by the on-going investigation on its 2 directors. Breadtalk has the highest P/E multiples at 32.26 which signifies the market has high expectations for its overseas expansion plan.



Financial Strength Analysis



































Breaktalk Kimly Koufu
Quick Ratio 0.9 3.05 1.98
Current Ratio 0.93 3.09 2
LT Debt to Equity 73.19% 0.04% 4.77%
Total Debt to Equity 143.44% 0.07% 5.22%

Kimly Ltd has the strongest balance sheet among the 3 companies and close to zero debt. On the other end of the scale, we have Breadtalk with 143% Total debt to equity and a current ratio less than 1.


That said, we don’t foresee any significant risks to the company day to day operations due to its high operating cash flow. They have taken up much debt to fuel their overseas growth plans.



Profitability Analysis





























Breaktalk Kimly Koufu
Gross Margin 56.2% 19.85% 67.85%
Operating Margin 5.12% 11.89% 12.98%
Net Profit Margin 3.18% 10.46% 10.93%

With regards to profitability, Koufu Group Ltd has the highest Net Profit Margin at 10.93%, slightly higher than Kimly but much higher than Breadtalk.


Breadtalk has a razor thin profit margin of only 3%, mainly due to the low profit margins for its bakery segment.



Conclusion


To sum up, if I will to pick 1 out of the 3 companies, it will be Koufu Group Ltd. Reasons being that:



  • BreadTalk has been expanding overseas for some time now but facing difficulties in churning out profits (especially in China). And its valuation is sky high right now as opposed to its growth.

  • Although one may find Kimly Ltd appealing for its cheap valuations and solid balance sheet, the CAD investigation may throw everything into a vortex. And the way i see it, there is limited upside for Kimly’s business model without the AsianStory as a new growth venture.

  • Koufu Group has one of the most eye-popping 67% gross margins i have seen. Low Debt, Reasonable Valuation + upcoming integrated facility may push its costs even lower.


However to end off, investors should be aware of the strong headwinds F&B companies are facing going forward. In this Bloomberg article, Labor-intensive service industries (e.g. food and beverage) has the most to lose out since the reduction in foreign workers’ quota will mean higher costs for the companies.


Looking for other stocks with strong economic moats and compelling financials?Simply click here to download it right now!

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$Kimly(1D0.SI) Added $Kimly(1D0.SI) writeup here -> https://docs.google.com/spreadsheets/d/1Ql...

Lots of cash but under probe by MAS & CAD; not a good sign! Lost acquisition of Asian Story Corp (ASC) means its growth is going to come to a halt...

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Smallcapasia started a poll


Discover SG & HK stock ideas from from our Stocks' Database @
http://bit.ly/InvestorsExchange


*We (@CS_Jacky and @Smallcapasia) are back (again) after a long break and going to take this slow and steady in future. We implemented the following improvements to serve you better:


  • Stock Rating based on our own opinion (on a scale of 1 to 5 stars)
  • Write-up URL Links (want to read analyst report or blogger write-ups on a particular company? Now you can!)
  • Up-and-coming Addition of HK stocks (HKEX is gunning for all the big names like Xiaomi, HaidiLao and we don't want to be left out.)


At the same time, here are the stocks (and adding):

$SingTel(Z74.SI) $Old Chang Kee(5ML.SI) $800 Super(5TG.SI) $StarHub(CC3.SI) $CapitaMall Trust(C38U.SI) $ComfortDelGro(C52.SI) $CSE Global(544.SI) $Sasseur Reit(CRPU.SI) $Tuan Sing(T24.SI) $CapitaLand(C31.SI)$Ascendas-hTrust(Q1P.SI)$VS(6963.MY)$COSMO LADY(2298.HK)$KAWAN(7216.MY)$AJI(2658.MY)$Jumbo(42R.SI)$Genting Sing(G13.SI)$MENGNIU DAIRY(2319.HK)$Sunpower(5GD.SI)$Nordic(MR7.SI)$Valuetronics(BN2.SI)$Trendlines(42T.SI)$Haw Par(H02.SI)$Jackspeed^(J17.SI)$ISDN(I07.SI)$Duty Free Intl(5SO.SI)$Far East Orchard(O10.SI)$China Sunsine(CH8.SI)$Japfa(UD2.SI)$ST Engineering(S63.SI)$Food Empire(F03.SI)$Cityneon(5HJ.SI)$HMI(588.SI)$CHINA EDU GROUP(839.HK)$CONSUN PHARMA(1681.HK)$Chip Eng Seng(C29.SI)$Banyan Tree(B58.SI)$TUNEPRO(5230.MY)$Khong Guan Flour(K03.SI)$TGUAN(7034.MY)$YZJ Shipbldg SGD(BS6.SI)$Cosco(F83.SI) $SCIENTX(4731.MY)$PING AN(2318.HK)$BOL(BOL.BK)$Lippo Malls Tr(D5IU.SI) $UMS(558.SI) $Golden Agri-Res(E5H.SI) $Silverlake Axis(5CP.SI)$Kimly(1D0.SI)$OCBC Bank(O39.SI)$Wilmar Intl(F34.SI)$Olam Intl(O32.SI) $Fu Yu(F13.SI) $SATS(S58.SI) $Japan Foods(5OI.SI) $SingPost(S08.SI) $Shopper360(1F0.SI) $Cosco(F83.SI) $QAF(Q01.SI) $SBS Transit(S61.SI) $PENTA(7160.MY) $HEC PHARM(1558.HK) 

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Blue Chips/Slow Growers (Large Mature Companies, usually provide regular dividends)
118 votes
Stalwarts (Medium-growth stocks w/ High single-digit to Low Double-Digit growth rates)
31 votes
Fast Growers (usually small caps w/ double-digit earnings growth rates)
180 votes
Cyclicals (typical airline, automotive, chemical, property companies depending on market cycles)
20 votes
Turnarounds (High Risks but Rewarding if Mgmt can steer the sinking ship on right course)
20 votes
Asset Plays (Trading below assets' value -> think cash, properties, investments, trademarks etc.)
19 votes
388 votes
Voting is ongoing
Smallcapasia started a poll

Happy National Day to Singapore!


In conjunction with Singapore's bday and icon as a food paradise, I have listed down all our listed Food Companies below (let me know if i miss any).


Vote for the company you want to be added into our stocks' database here - http://bit.ly/InvestorsExchangeNew.


Top 3 most voted by the end of 9th August 2018 23.59pm will take precedence ahead of others! Let the "Foodie Game" begin!


$Old Chang Kee(5ML.SI) $QAF(Q01.SI) $Japan Foods(5OI.SI) $RE&S Hldg(1G1.SI) $Neo(5UJ.SI) $ABR(533.SI) $BreadTalk Grp(CTN.SI) $Jumbo(42R.SI) $Katrina(1A0.SI) $Kimly(1D0.SI) $Sakae(5DO.SI) $Koufu(VL6.SI) $No Signboard(1G6.SI) $Soup Restaurant(5KI.SI) $Tung Lok Rest(540.SI)

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Update: Added $CSE Global(544.SI) and $ComfortDelGro(C52.SI) in the spreadsheet - https://docs.google.com/spreadsheets/d/1Ql...

Do you have the habit of looking at whether the outlet or the product you buying is part of a listed company?

I always do that and it sort of irritates my wife once i start talking about them e.g. Dear you know Din Tai Fung is part of $BreadTalk Grp(CTN.SI) and has the highest margins of them all? LOL

Sometimes, i will even go try out the products just to do some 'research' or professionally they call it 'scuttle-butt'. Check out my Asian Story drinks, where the company is acquired by $Kimly(1D0.SI) for $16 million. I can still remember the "So?" face from my wife when i tell her this news. Or how ichiban sushi ($RE&S Hldg(1G1.SI) is moving towards the quick service restaurants for higher margins but i still see a reasonable patron-ship for the restaurants.

Anyway, i guess I have found my Ikigai through investing. And i decided to carry on the legacy from @LauShiErn to build a database of Asia stocks (Singapore, Malaysia, Hong Kong). I spoke to him and he is open to it.

If you are also keen to join me, feel free to add in your views/analysis on the Google Sheets here (https://docs.google.com/spreadsheets/d/1Ql...). I will be adding the stocks bit by bit as i go about studying them via their annual reports and stuff.

On a last note, you can also post your Q&A in the comments and i will prioritize the stocks into the Google sheets as we go along. Cheers!

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