Yesterday, I came across an article on Pico, a company which is in the same industry as Kingsmen. The article was an interview with the chairman of Pico. I read the article to know more about the industry and to learn more about Kingsmen’s competitors.
After reading the article, I realised that Pico has a strong footing in China, the region where Kingsmen is looking to get a better footing in. In the article, it says that “The current breakdown by geographical segment for Pico is 60% from Greater China and 40% from the rest of the world, with India set to be the next growth driver.” For Kingsmen, it’s almost the other way around. For FY2009, Singapore brought in 60.3% of the revenues for Kingsmen vs China’s 18.5%. However, Kingsmen is more into interiors than exhibitions (a segment Pico is more involved in and this brings in bulk of the revenues). All the while, the interiors segment has been bringing in most of the revenues for Kingsmen except in FY2009. I believe in FY2009, exhibitions and museums brought in the bulk of revenues than interiors segment due to the Universal Studio Singapore project.
The question now is, going forward, will Kingsmen be affected by competition in China, especially from Pico since it’s well-established in China? We know Kingsmen is expanding its business in China as there are lots of potential in that region.
I believe Kingsmen will do well going into China. Reasons being, Kingsmen is well-established and is reputable, it has competent management (seen from the financials, work done and informal chat with the GM), strong cash positions and repeat customers. Brands based in Singapore expanding into China and who have been engaging Kingsmen all these while, will continue to do so when they expand into China. A great example of this would be F J Benjamin. It is going to expand its Raoul stores to China and I’m sure it will continue to engage Kingsmen because of good rapport. Working with F J Benjamin will be perfect for Kingsmen to be recognized by local Chinese retailers and this could be a catalyst for further projects in China.
On a side note, after reading the article on Pico, I emailed the General Manager of Kingsmen (met him during Invest Fair 2010 with a group of shareholders) to know his thoughts about the Chinese market. I surprisingly got a reply (shows management is willing to entertain minority shareholders like me) from him. I will reproduce the email below.
Dear Mr Cheng,
I would like to ask a question from a shareholder point-of-view. Recently, Kingsmen raised its equity into the China market through Kingsmen (Noth Asia) Limited and currently holds 92.2% of it. Kingsmen is looking to gain a better foothold in China from the looks of it.
How keen is the competition in China and will the profits be streaming in well, considering Pico is already quite well-established in China? I came across an article on Pico at http://www.nextinsight.net/index.php?option=com_content&view=article&id=3273&Itemid=1 and it shows how dominant Pico already is in China. How is Kingsmen going to better Pico to gain a footing in China?
Looking forward to your reply. Thank you.
Mr Cheng’s reply:
Nice to hear from you. Yes, China will be one of the Group’s growth engines going forward and we will be committing more resources to grow that market. We have already been in the China market for over 10 years now but we have only scratched the surface in addressing that market. Significantly, the global economic shift has also made it necessary for us to push harder into China as many our existing clients as well as new global brands are looking to China for growth and they have a need our services there. Our markets strategy in China also be to focus on the mid to high end segment and brands – and therefore competing in a different arena from our traditional competitors – who are more focused on the exhibitions and events space.