Kingsmen Creatives

Hmm,

as of 1116hr there are 3 large blocks of transactions at 55c/share. Seems to be all married deals. I wonder...

Indeed .......... now > 3,500,000 shares Kingsmen shares have been traded in the last 2.1/2 trading sessions, with just under 1,200,0000 shares today. This corresponds to at least 15 times the normal daily trading volume. From the trading patterns it is difficult to see if it is just one seller ............ but it looks like one enthusiastic buyer is active - today's transactions show as "other" on my system.

(13-09-2011, 07:10 AM)Musicwhiz Wrote: Kingsmen would have, by now, implemented systems, processes and controls in place with which to ensure they maintain their standards and quality of work, with or without the presence of the two founding members Mr. Ben Soh and Mr. Simon Ong. After all, we are talking about a 35-year old Company which has managed to weather through several crises and recessions.

I would have to add that even though Kingsmen is in a competitive industry, most of the players are smaller in scale and breadth of services (I had checked this before by asking around) and therefore cannot compete on the same level as Kingsmen. Even Pico FE which is supposedly the market leader does not have a strong Interior Fit-Out Division and are more into large exhibitions and shows, thus there is no way to compare apples to apples, like for like. I believe (and continue to believe) that what makes Kingsmen stand out is not their net margins (which are just 6-7%), but it is their Roll-Out Management program, export fixtures, quality of work for events/exhibitions, scale and reputation for timely and good work. If not, they would not have been selected by leading brands such as the recently completed H&M store, and soon to be opened Ambercrombie and Fitch. They also have the knowledge and expertise now to pitch for theme park projects in the region, which should (I believe) come to fruition in the next few years.

A competitive advantage may not simply reside in staff and human resource - it should technically embody the entire organization, which is why it is tough or impossible to replicate/copy.

Thanks!

mw, i totally agree with you on the merits of kingsmen's business and i do not doubt one bit their competency in their field. yes, it is superior in many ways to its competitors. if kingsmen is a private company and i'm a private equity investor, there is no doubt that i will put a significant portion of my portfolio into it, for the next five years. i'm willing to do this (but not at 55cts/shr) because there's less market risk when it's not listed. but mostly because i believe the company will still be earning more or less the same five years from now.

no doubt, kingsmen's systems and processes instituted over the many years will give it an edge over its competitors. but all the systems and processes put in place today was a a result of the intelligence and capability of the two founders. kingsmen better performance than its competitors is a testimony to the managers' superior capability, relative to say, pico's management. if someone from pico is hired to replace the two founders, what is the potential for value-add? in such a situation, i believe kingsmen can still perform reasonably well. but without smart leadership to constantly maintain the pole position (as the present two founders are doing), your moat (and therefore, profits and valuation) will slowly, but eventually, be eroded. businesses decline when they no longer operate efficiently, or becomes slow in responding to the changing market demands/conditions. i'm sure most would have worked for a not-so-good manager before to know that bad management can screw-up or impede improvements in business quality.

the reason why buffett keeps emphasizing on 'economic moat' is because he wants the business to still make good money even if a mediocre manager is put in-charge. there is a difference in good moat businesses, like genting, and very-well-managed general businesses, which in this case is kingsmen. but i'm sure there are also cases of successful general businesses which managed to maintain the moat they have built, after the founder departs from the company. i don't have its financials, but ikea could probably be one of them. i guess the question is, has kingsmen entrenched itself in the market it is competing in, in the long term? i don't really know the industry well so i can't say.

if present management doesn't have a succession plan in place, or is unable to find suitable candidates, it is in shareholders' (including the founders) interest to put the business up for sale while it is still doing well. and while the market has not yet realise the importance in value-add of the two founders to kingsmen's business.

just in case anyone is wondering, i'm not trying to attack kingmen's share price lah! and i wasn't the one buying up so much shares these few days also. i know alot of kingsmen fans here. but if everyone praise this company then the forum no fun right? thesis, anti-thesis, then synthesis (from the real karl marx). but seriously, i just thought kingsmen made a very good example for me to illicit some views i have towards business and investing.

(13-09-2011, 08:56 PM)karlmarx Wrote:

(13-09-2011, 07:10 AM)Musicwhiz Wrote: Thanks!

mw, i totally agree with you on the merits of kingsmen's business and i do not doubt one bit their competency in their field. yes, it is superior in many ways to its competitors. if kingsmen is a private company and i'm a private equity investor, there is no doubt that i will put a significant portion of my portfolio into it, for the next five years. i'm willing to do this (but not at 55cts/shr) because there's less market risk when it's not listed. but mostly because i believe the company will still be earning more or less the same five years from now.

In my opinion, I do not agree that there is less risk when investing in private companies compared to listed companies.

Firstly, information available for listed companies is more compared to private companies. Information asymmetry is a risk to investors.

Secondly, Corporate Governance for listed companies is more stringent compared to private firms.

(13-09-2011, 09:58 PM)csl123 Wrote: In my opinion, I do not agree that there is less risk when investing in private companies compared to listed companies.

Firstly, information available for listed companies is more compared to private companies. Information asymmetry is a risk to investors.

Secondly, Corporate Governance for listed companies is more stringent compared to private firms.

i agree with you completely.

i was saying that only because of my present knowledge of kingsmen. my point was that the business will do fine, but not necessarily the share price.

nevertheless, PE deals involving mid-sized businesses would usually involve auditing and due-diligence processes. smart investors will not spend millions buying a stake in a company based on the books produced by the company's own accountants.

Kingsmen has the advantage of being at the top of food chain... in this business, they can reap higher margin due to reputation...

My concern is that branded companies like Coach doesn't stick with Kingsmen as their sole contractor. They award contract to other companies as well... hence, the recurring income from repeat customers may not be that consistent.

The recent IR boom in Singapore has boosted Kingsmen's earning by quite a good amount... Kingsmen may find it a challenge to maintain that performance?

Hope to hear your views!

Quote:i was saying that only because of my present knowledge of kingsmen. my point was that the business will do fine, but not necessarily the share price.

If the business does well in the long-term, the share price will follow suit as well. In the short-term, the share price is not necessarily equal to the value of the business. But in the long-term, the two will converge.

(14-09-2011, 06:50 PM)FFNow Wrote:

Quote:i was saying that only because of my present knowledge of kingsmen. my point was that the business will do fine, but not necessarily the share price.

If the business does well in the long-term, the share price will follow suit as well. In the short-term, the share price is not necessarily equal to the value of the business. But in the long-term, the two will converge.

actually, what i had in mind was that their earnings over the next few years will be maintained. perhaps growing at a rate of 3% p.a over 5 years. i don't know. but being mediocre (no/low growth) in term of earnings is 'will do fine' to me. i also agree that the two IRs has given alot of work to kingsmen of recent years. will the lack of new mega high(er) class malls affect kingsmen? maybe. but maybe some of the aged luxury stores may seek to re-invent their image/appeal too.

just to add, i think it is unrealistic for a business to keep growing year-on-year without encountering human resource/efficiency/financial/succession/etc problems. businesses grow like a mountaineer scaling everest; from one base camp to the next, with sufficient rest to recuperate and re-organise in between. each time ben and simon make a breakthrough in kingmen's business, it is a new experience to them. they have not been to the peak before, and they only know how difficult conditions can get, as they go higher. you can say that ben and simon -- or founder-run businesses -- are always learning on the job; once they 'level up,' they will have to get ready to fight an even meaner dragon.

businesses that chiong hard and fast usually end up with too many problems that they have to deal with. and these problems usually keep them busy from actually growing. or worse if it has hurt their confidence in scaling to the next base camp. i think sakae and sinwa are such businesses.

If Kingsmen is indeed a high-quality business overall destined to continue growing steadily under the present management, wouldn't it be reasonable to expect that sometime in the future someone is going to make a good offer to buy the whole company? Is this wishful thinking, or a high possibility, bearing in mind the 2 founders will have to retire someday.

(14-09-2011, 08:34 PM)dydx Wrote: If Kingsmen is indeed a high-quality business overall destined to continue growing steadily under the present management, wouldn't it be reasonable to expect that sometime in the future someone is going to make a good offer to buy the whole company? Is this wishful thinking, or a high possibility, bearing in mind the 2 founders will have to retire someday.

i believe this is what most of kingsmen's long-term investors have come to conclude. i also think the chances of a buy-out is pretty high, and the acquirer is likely to be pico. running kingmen's business successfully will require design savvy owners. given that few owners of capital possess such knowledge or talent to be confident in running the business, the chances of the acquirer being from another industry and thus paying an overpriced amount (due to ignorance) for kingsmen is low.

competitors of kingsmen probably know the predicament that ben and simon is in. and they are probably the ones who have been low-balling them. time is not on kingmen's side. pico, or whoever, may just be waiting for ben and simon to accept their low(er) offers.