Wolf Money(Kimly Ltd)

 

(Image credit: Kimly Ltd)

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• One of the main beneficiaries of CDC and SG60 vouchers

• Long term support like CDC voucher scheme is the cornerstone of our government’s policy especially in area of tackling cost of living issue

• Predictable cash flow and stable dividend yield 

• Easily recognisable brands across Singapore with strong competitive moats

This is an odd position on two points. I pre-wrote my detail thesis before I bought my shares today and I usually don’t buy Catalist listed companies. They are too small to be noticed and many are of poor quality. There are only a handful of Catalist-listed stocks which I will consider investible. Among the Catalist stocks, Kimly ranks highly in term of profitability. I am surprised they never applied for a main board listing which they are more than capable off. Maybe $500m market cap might just do the trick. I am doing some cash management in Kimly. I will be happy with a 10 to 15% improvement. I reduced my holdings in ComfortDelGro, using the capital to buy Kimly which had similar defensive moats.

Kimly runs a chain of coffee shops and Halal food outlets. I did a rough estimate. They control at least 11% of the coffee shop market in Singapore, which makes them one of the largest players in the sector. They also own a few in-house brands that have wide appeal. Tenderbest has the potential to be the KFC of Singapore if they are able to scale up. The Halal food court business is showing the highest growth potential. These are the merits of the company.

(One of the 5 Halal coffee shops run by Kimly)

(CDC vouchers accepted here)

(One of my top three local fried chicken in Singapore according to the unofficial Lone Wolf tyre food guide)

Merits

1.) Kimly is a CDC voucher play. Last year, the government issued close to $1b in CDC vouchers to households in Singapore. In 2025, those vouchers had grown to $3b. Almost 3x of last year due to SG 60 celebrations. They can only be spent locally at hawker centres, neighbourhood shops and coffee shops. Kimly is likely to be a direct beneficiary of the policy, given its network of coffee shops and eateries across the heartlands in Singapore. This year, CDC vouchers will be more impactful than previous years. Adult Singaporeans are given $600 each vs $600 per household last year. The other CDC play, Sheng Siong had moved up.

2.) CDC voucher scheme is likely to be a cornerstone policy of the government. PM Wong, mentioned this in an article. The government continues to support the citizens in tackling the cost of living issue through scheme like CDC Vouchers. Kimly is one of the participating CDC merchants.   

(Source Straits Times: CDC Voucher is not a one-off scheme)

3.) Good dividend. The dividend yield at current price is around 5.5%, which is attractive given the falling deposit rates. Last year, dividends were 2c. The company has undertaken to give out at least 50% of net earnings as dividends.

4.) The government is forming a task force to help local businesses tackle the outflow of currency to Malaysia. Very likely, more CDC vouchers will be issued to help local businesses. I am quite confident they will announce more vouchers to be given to Singaporeans closer to the RTS opening date to reduce the flow of outbound spending to Malaysia. Maybe we will have another category of “Retail CDC vouchers” for use in our shopping malls to help the REITs.

(Image credit Tin Peh Ling FB: My MP making coffee)

5.) The CDC vouchers with it good intentions will drive customers from non-CDC f&b outlets to those CDC accepting f&b. Kimly is one beneficiary as most of their outlets are CDC vouchers certified. CDC also promotes spending because it is “free money”. It is of little surprise how people spend their free vouchers compare to paying out from their pocket. A typical question asked, “Boss, you accept CDC? Yes. Can I have an extra chicken wing, fish fillet and lobster on my bee hoon? pay by CDC”. Some hawkers I had spoken saw a big jump in their business. My favourite prawn mee was sold out by 11.30am, two hours earlier than usual.

6.) Kimly high margin business constantly generates more than 10% net profit. They are one of the highest margin f&b businesses in Singapore. The strong cash-generating nature of the business adds to the appeal of the company. 

7.) The company is in a net cash position. Return on equity is at a high 18%. Kimly generates stable profit given their revenue came locally. They are less affected by geographical and trade war issues. They have a good 60/40 split on their revenue managing their own food outlets and as a landlord of coffee shops. Both business units are complimentary to each other.

(Kimly generates a stable net income of at least $30m annually over the past 4 years)

8.) At $450m market capitalisation, they are at the sweet spot for EQMP funds specialised in buying local small cap stocks. The liquidity is decent. 

9.) They are not under the mercy of lessees as they are able to fill up their coffee shop with in-house brands like Kimly Tim Sum, Tenderbest, Kimly Cai Fan and Kimly Zi Char. The central kitchen model improves efficiency and quality. 

10.) Going forward, I expect only the bigger players in our f&b sector can survive in Singapore as cost overwhelmed revenue. Consolidation within the coffeeshops sector will likely to gain momentum. I foreshadow only 4 to 5 major players can survive in the cut throat industry due to their economy of scale. There are only around 420 coffee shops left under private ownership with the rest owned by HDB.

(One of Kimly in-house brand)

(Cai Fan stall run by Kimly)

(The many brands under Kimly)

Risks

1.) The main risks involve food and wage inflation as the sector is facing high cost and manpower shortage.

2.) Limited growth in our market, given the rarity of coffee shops in Singapore.

3.) The share price is slow moving given their defensive nature. Kimly is trading at 12x p/e not entirely cheap. Support can be seen at 33c and 35c.

4.) The high cost on rental and wage in the sector is starting to bite on profitability. 1H 25 profit was down 16%. One can be hopeful for the second half as the vouchers take effect on sales.

Coffee shops have become the social fabrics of our nation. Those assets are in limited supply, even if they are available for purchase, prices are sky high. Kimly could be seen as a “Coffeeshops REITs” with its stable dividends. A supportive and caring PM who loves giving vouchers, the future look bright for Kimly. My neighbourhood auntie and uncle love their man. They praise the “Fortune God” and “Voucher WXXX” for giving them more good years ahead. Is Kimly for you? Only vouchers can tell. 

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