Invest Fair ’10 – Kingsmen

I recently attended Kingsmen Creatives’s presentation at Invest Fair 2010. The company presentation was given by Mr Andrew Cheng, Group General Manager and the talk was entitled “Positioned for Growth”. I will list the key points covered during the talk and the Q&A section, as follows:

  • Generally, looking at past trends, second half of the FY brings about more revenues than first half due to sprucing up of shops and theme parks during year-end period. First half  contribution – 40%, second half – 60%.
  • 70% are repeat customers. Kingsmen knows their client’s style and thus, can cater to their needs easily.
  • Future growths: MICE industry growth both in Singapore and region; Universal Studios Phase 2, 3 and maintenance; theme parks and attractions to be built (eg. Legoland, Universal Studios Dubai, Hongkong Disneyland, etc); mega events like F1; re-making of Orchard Road; Marina Bay Sands Shoppes; alternative marketing programmes (eg. LED billboards); fixtures export – increasing interest from US, Europe.

After the talk, a few of us mobbed Mr Cheng to ask him more questions and he was more than happy to answer them. It was in a more relaxed environment and I felt he was very honest in answering those questions. The discussions are as follows:

  • Universal Studios Singapore project was a first for many companies involved in it. So, the learning curve was very steep and profit margins were slim. In fact, Kingsmen thought of foregoing taking up Universal Studios project as it felt that it didn’t have enough expertise. But, as a shareholder, I feel that Kingsmen did an outstanding job and should be given a pat on the back. In the future, Kingsmen is poised to take advantage of future mega-scale projects like Universal Studios since it already has the experience under its belt.
  • Kingsmen follows a supply chain model where it sub-contracts out the fit-out and because of this, it can be stringent on the quality of the work and rejects any work that are not up to standard without affecting its own business.
  • Recently, the company announcements by Kingsmen were almost non-existent even though they won a couple of contracts. Mr Cheng said that they would rather announce in one go than in bits and pieces. I was satisfied that at least Kingsmen is aware of this.
  • Liquidity wise, there are many buyers but not many sellers in the market. Kingsmen ever thought of doing a rights issue and stock splits to increase liquidity but decided against them. Mr Cheng believes when revenue hits around $500 million, the institutional buyers will become interested and liquidity will be boosted.

I snapped a few pictures of the slides (pardon me for the poor quality of the images):

Below is a brochure obtained from Kingsmen’s booth:

Lastly, if you have the patience, you can hear a recording of the whole 30 mins presentation that I have uploaded at 4shared. The background noise was overwhelming during the talk so you may have to strain to hear the recording properly.

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5 thoughts on “Invest Fair ’10 – Kingsmen

  1. Hi FFN,

    Thank you so much for blogging about the Kingsmen talk at Invest Fair. I had wanted to go but in the end was tied up with a family commitment; hence had to give it a miss.

    I didn’t expect the Group General Manager to give such a comprehensive talk and even take Q&A from people; darn now I wish I had the chance to engage him. Thus far my contact with Management and staff from Kingsmen proper has been virtually zero – I had invested by analyzing their business fundamentals, annual reports, business model and industry prospects. Hence, I guess I sort of neglected the “Phil Fisher” aspect of investing – talking to executives!

    Appreciate the effort you put in to summarize the key points, post up brochures and even record a 30-min clip (which I will listen to over the weekend).

    However, one point I would like to point out is that I am surprised Kingsmen actually contemplated a rights issue – they have no pressing need for cash for expansion and they have strong FCF and a good cash hoard. If it’s to increase liquidity, then a share split or a bonus issue should do the trick; but even then I don’t fancy that as it’s just a cosmetic move.

    I also do not agree that there are more buyers than sellers; thus far I see quite a large number of sellers at every bid-ask differential of 0.5 cents. I wonder why the GM thinks that funds will only be interested if Kingsmen has hit the S$500 million revenue mark. You mean funds cannot purchase shares if the market cap or revenue base is too low?

    Regards.

    • Hi MW,

      It’s my pleasure.

      The GM was very forthcoming and he even gave us his namecard. I felt that was a very good gesture.

      I had the same thought as you going through my mind the moment he mentioned about the rights issue. Since they didn’t have a pressing cash issue, I think the management decided against it. Also, a rights issue will dilute our holdings. So, luckily Kingsmen didn’t undertake a rights issue and I’m sure the management knows about it too well.

      I think why the GM said that funds will be interested when the revenue hits $500m is that funds want to buy a very liquid stock. So, when funds start buying, it will get liquid and other funds will start buying in as well. This is just my take.

  2. As much as I like this company I have yet to invest in it. While the rest of the figures look good, their Net Profit Margin is below my minimum requirement of 10%. But this is still in my target list.

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