UOB Kay Hian analysts Heidi Mo and John Cheong have slightly lowered their target price for Kimly from 35 cents to 34 cents following FY2024 earnings that came in below expectations, no thanks to higher operating costs ranging from utilities to labour.
Kimly managed to record slightly higher revenue of $319 million for its FY2024, up 2% y-o-y with contributions from new outlets and cleaning contracts. However, earnings was down 7% y-o-y to $32 million.
Despite the lower earnings, Kimly plans to pay a total FY2024 dividend of 2 cents, implying a yield of 6.3%. In contrast, Kimly paid a total of 1.68 cents paid for FY2023.
Mo and Cheong continue to rate Kimly "hold" given its strong cash-generative ability that can support its dividend policy of paying out no less than 50% of its earnings.
They note that despite the competitive industry landscape and mounting costs, Kimly is still expanding its network.
In YF2024, it opened three new outlets, 11 stalls and two restaurants. It also opened a new food court in Lucky Plaza, and proposed the acquisition of a coffee shop at Block 204 Serangoon Central.
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"These new openings will contribute to better FY2025 earnings," state Mo and Cheong.
Even so, they have lowered their FY2025 and FY2026 earnings projections by 2% each, to take into account higher labour costs.
Their slightly revised price target of 34 cents is pegged to 12x FY2025 earnings.
"Kimly continues to face persistent pressures in the challenging operating environment with the tight labour market and rising rental and utility costs," the analysts note.
Kimly shares changed hands at 33 cents as at 11.10 am, up 1.56% for the day but down 1.52% year to date.
