Kimly voluntarily suspends trading amid disclosure gaps

Barely a week after Kimly Limited sought a halt in the trading of its shares pending an announcement, Singapore's largest traditional coffee shop operator voluntarily suspended trading on Tuesday, amid speculation of disclosure gaps.

The company, which operates and manages a network of food outlets and food stalls across Singapore's heartland, said the latest suspension comes because there are pending matters to be communicated to shareholders.

These are, namely, regulatory orders for the provision of certain information and documents, updates on a recent acquisition and the group's unaudited full-year results for the period ended Sept 30.

Market watchers suspect that these could be related to the company's directors disclosure in the purchase of Asian Story Corporation (ASC), a maker and seller of drinks in Asian flavours such as chrysanthemum, wintermelon, water chestnut and lychee.

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On July 2, Kimly completed the acquisition of ASC from Wang Chia Ye for S$16 million in cash. The transaction provided for Mr Wang to have an "earn-out payment", depending on the amount of pre-tax profit the company makes this calendar year. If the pre-tax profit exceeds S$2 million, he will be entitled to an earn-out payment of S$8 million; if it is below S$2 million, the earn-out payment will be pro-rated.

There has been curiosity over the relationship between ASC and beverage group, Pokka. Kimly's former non-executive and non-independent director Alain Ong (also known as Ong Eng Sing) was, until recently, Pokka International's former chief executive officer. He retired from his directorship at Kimly in January this year after the annual general meeting.

Then, in late September, the Chinese media reported that he was tipped to join Kimly. Kimly declined to comment "on news or information from third-party sources".

An analyst said: "I don't think there is anything wrong with the group's financial numbers. Hope not. I suspect there is a disclosure gap in the purchase of Asian Story, probably involving director's interest."

The analyst added: "Asian Story is earnings accretive and will affect Kimly's FY18 results."

Founded in 1990 by its executive chairman Lim Hee Liat and several of his friends, Kimly was listed on Catalist of the Singapore Exchange Securities Trading on March 20, 2017. Of the 173.8 million new shares offered at 25 Singapore cents each, 170 million were privately placed, leaving 3.8 million for public subscription.

Post-initial public offer (IPO), controlling shareholder Mr Lim owned 42.4 per cent of Kimly; his brother Peter Lim owns 0.05 per cent.

The company earmarked S$33.4 million of the net proceeds raised from the IPO to fund the total estimated expenditure for acquisitions, joint ventures, general business expansion (including the establishment of new food outlets) and refurbishment of existing food outlets.

The IPO was sponsored by PrimePartners Corporate Finance. Contacted on the suspension, Joseph Au at PrimePartners declined to comment.

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Since the IPO popped towards 55 Singapore cents, Kimly shares have slipped to hover around 28 Singapore cents at the time of suspension. At 28 Singapore cents, the shares were trading at a multiple of 14 times its estimated FY18 earnings.

Another analyst said the group enjoys a proven track record as a food outlet operator.

"It is cash-flow positive. Coupled with the IPO funds, its balance sheet is quite rich."

For the third quarter ended June 30, Kimly reported a 4.8 per cent slip in net profit to S$5 million despite a 4.2 per cent growth in revenue to S$49.9 million.

The group's financial position was strong, with total cash and bank balances at S$84 million at the end of June 2018.

This article was first published in The Business Times. Permission required for reproduction.