The acquirer, Muginoho Global, is a wholly-owned subsidiary of Muginoho Holdings. Headquartered in Japan, Muginoho owns a portfolio of pastry and confectionery brands such as Beard Papa’s and Cocofrans.
“We believe the disposal of Rive Gauche was largely due to a lack of realisable synergies with Kimly’s core coffee shop operations,” the analysts highlight.
The purchase consideration is $2.8 million, of which $1.8 million will be placed in escrow and disbursed to Kimly based on payment milestones. Rive Gauche recorded FY2021 ended Sept 2021 net profit of about $400,000 and 1HFY2022 net profit of about $100,000. The purchase consideration represents a one-off disposal gain of $2.6 million for Kimly upon completion of the transaction.
“Assuming flat h-o-h growth in net profit in 2HFY2022, the implied acquisition multiple is about 12x FY2022 P/E, which we deem fair,” say Tan and Ong.
Kimly’s net cash remains healthy at $41 million as at end-1HFY2022. While rising prices could spur some downtrading activities as consumers spend on more affordable food products, the analysts see limited near-term catalysts — given post-Covid 19 footfall normalisation and inflationary pressures weighing on margins.
CGS-CIMB’s target price is pegged to 15.4x CY2023 P/E (0.5 standard deviations below its 5-year historical mean) in view of slowing growth prospects. The stock currently trades at about 14x CY2023F P/E (about 1 standard deviation below its 5-year historical mean).
As at 11.19am, shares in Kimly are trading 0.5 cents higher or 1.4% up at 36 cents.
