Humpty Dumpty sat on a wall,
Humpty Dumpty had a great fall
All the king’s horses and all the king’s men,
Couldn’t put Humpty together again
I attended Kingsmen’s AGM on 27th April 2011. I should say it was a very enjoyable experience. I learnt a lot about the company and learnt things that one cannot gleam by just reading the annual reports. I will attempt to summarise in point form what was mentioned during the AGM and what I learnt from talking to Andrew Cheng, Group General Manager.
On Kingsmen’s business
- Kingsmen is looking to expand its HQ in Singapore. It is seriously sourcing for new land to build on within the next 5 years. The current building is too small with not enough offices.
- Benedict Soh agreed that the business has low barriers to entry. However, it takes a lot of time and effort for a startup company to be of Kingsmen stature and branding. Kingsmen has got a very good track record with many international clients. It also has international presence, allowing it to capture the various markets.
- Benedict was conservative about FY 2011 results but it will pick up in the coming years due to various projects. He said investors should not expect too much this year. He said he would rather err on the side of conservatism than promise people exceptional results. (I found Benedict to be very honest and prudent in this aspect).
- Kingsmen provides a business of international standard but at Asian costs.
- Management doesn’t have a formal dividend policy but its dividend payout ratio is in the region of 30% – 50% and they plan to keep it that way.
- Trade receivables in balance sheet as of FY 2010 is mostly due to World Expo project and Universal Studios project. Most of the trade receivables have been collected according to Judith, the Financial Controller.
- Order book will be revealed in the 1Q2011 to be released in around two weeks’ time.
- Andrew mentioned forex losses were quite significant in FY 2010 and the Group is looking into how to minimize the losses in the future. One way is to secure all contracts in Singapore dollars. I think he was referring to Pg 108 of the Annual Report where forex losses were $197,000 in 2009 but in 2010 was $1.28 million.
On theme park business
- There’s an overall theme park boom in China and Asia
- Kingsmen will definitely have jobs from Disney Shanghai project
- Kingsmen aims to make its theme park business as good as its retail division (I think in terms of revenue and margins)
- Benedict sees that Kingsmen can do even better in the future in the theme parks arena. There’s always room for improvement.
- Kingsmen is looking at better net profit margin for the theme park business as they gain more experience and have better expertise going forward
- Did $500k worth of “Transformers” fixtures for Hollywood (fixtures export has got better margins)
- Compensation for management is results-based and is not fixed. If they deliver higher profits for the company, they get higher compensation. Their basic is very low.
- One of General Electric’s CEO (before Jack Welch) has said he manages talents in the company. He goes around to talk to his subordinates and guides them. Benedict likes this style of management (maybe he’s already practicing this in the company).
- Performance share scheme was introduced in 2009 to encourage and give incentives to employees. The treasury shares are used for this scheme so that it doesn’t dilute shareholders’ holdings. Share options are not used nowadays as incentives as it dilutes shareholders’ holdings.
- When asked by an investor how come the share price is depressed, Benedict said management doesn’t manipulate share price. There are buy calls by various analysts with target price in the region of $0.70 – $0.85 but stock is still undervalued. However, shareholders should be happy that they own shares of a good business and that they are getting good dividends from the company. Another investor chipped in to say that the price will slowly go up when more people realise about this company and that management should not be myopic and manipulate share price for short-term gains. Prices of good companies will not stay depressed for long. (I truly concur with management and the investor)
- Shares are given to overseas subsidiaries/associates eg. to Japanese management. This keeps them connected to the HQ and to the company (especially when they see dividends rolling in every year) and is symbolic in nature.
- Kingsmen views training as very essential to groom talents. Management which trains staff are good leaders.
- Kingsmen’s business is talent-based. So to retain talents (designers, etc), on top of monetary incentives, company culture and the intangibles play a big part. Kingsmen creates a good environment for its designers, has “makan” and bonding sessions every week in the HQ, has regular in-house design competitions to promote competition and to keep the designers on their toes. It also organises trips to Outward Bound School for its staff. Creative people like to work in a conducive environment and Kingsmen provides this environment. Andrew said that Kingsmen minimizes the push factors that makes a talent move away to another company.
The overall mood in the AGM was very relaxed, friendly, warm and also, Benedict was very forthcoming and honest. I have read somewhere that the way the AGM is conducted tells a lot about the company and I’m satisfied that I’ve put my money in safe hands. Also, when I saw Benedict walking into the room, I felt he had an aura around him and that he could command the whole room with just his presence. He also greeted and shook hands with those present on the way into the room.
Those present were also given a souvenir in the form of a 3-sided ruler with different scales marked on it (I guess that is what designers use when coming up with a blueprint). The food was sumptuous and it had a wide spread as well. After the AGM, Andrew took a few of us around for a tour of the HQ and showed us around the various offices, workshops and the showroom where clients are shown fabricated models of fixtures. Overall, it was an excellent experience for me and it was time very well spent!