Kingsmen Creatives

*For full article, please visit the website.

More potential business for Kingsmen's fit-out division?

The Straits Times
www.straitstimes.com
Published on Aug 06, 2012
Ion looking empty? Still fully leased, says mall
24 new tenants including retail giant H&M moving in by end of the year

By lee xin en

SHOPPERS have noticed that Basement 3 of Ion Orchard has looked sparse for a while, since more than 10 shops moved out after their three-year leases expired last month.

But the iconic mall said it is fully leased, and is undergoing its first major revamp since it opened three years ago.

Gone are Wacoal, Kipling, and m)phosis, among others. Coming in will be Swedish retail giant H&M, which will open its second store here in the mall by the end of the year. The 20,000 sq ft store will span two storeys in Basements 2 and 3, taking over the space of adidas, The North Face and Guess.

It will be among 24 new tenants which will move in by the end of the year, including South- east Asia's first Yves Saint Laurent Beaute boutique store. The brand, which left Asia-Pacific markets three years ago, sells fragrances, cosmetics and skincare products and will open in the middle of this month.

Tenants who are setting up their first stand-alone stores in Singapore include Vivienne Westwood Anglomania, French fashion label Carven, German skincare label Dr Hauschka and Greek beauty brand Apivita.

The mall's food hall in Basement 4 is also undergoing renovation and will house a new concept to be completed by the fourth quarter of this year.

A spokesman for Ion Orchard said tenants typically signed leases of between three and five years when the mall opened in July 2009.

Some were up for renewal this year, giving the mall the opportunity to refresh its offerings.

The mall's popularity is helping it to buck the trend of cooling rental prices here.

A report released last month by property consultancy CBRE showed that rental rates in prime shopping areas here have dropped from US$470 (S$584) to US$454 per sq ft a year in the first quarter of this year, but the Ion spokesman said its rents have been on the uptrend, although he declined to give figures.

Some of its tenants say they exited because of the increased rent.

A spokesman for Kipling, an international bag label, said it had not renewed its lease because the asking price was "just a bit too ridiculous".

She said: "We were asked for almost double that of our previous rent. Even if we had changed locations, the prices were still too high so we had to move out."
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I just like this on-going pattern in the local retail scene which will continue to benefit Kingsmen: new brand-owners and retailers come and go, existing retailers expand or cut back, and those doing well or just o.k. still have to refurbish or upgrade their stores to stay in the game. Kingsmen just have to remain good in their fit-out trade and offer good services and execution to customers, and choose them well to benefit from their growth over time.

(06-08-2012, 01:46 PM)dydx Wrote: I just like this on-going pattern in the local retail scene which will continue to benefit Kingsmen: new brand-owners and retailers come and go, existing retailers expand or cut back, and those doing well or just o.k. still have to refurbish or upgrade their stores to stay in the game. Kingsmen just have to remain good in their fit-out trade and offer good services and execution to customers, and choose them well to benefit from their growth over time.

Reading your statement, I figured that in a sense, outsiders may feel that the Interior Fit-Out Division is somewhat "volatile". Because you have the following sub-segments of customers:-

1) Those who are expanding and opening more stores in other countries or within Singapore - Uniqlo and H&M come to mind

2) Those who are establishing their first ever outlet in Singapore and chose Kingsmen - Abercrombie and Fitch in this case.

3) Those with established operations who need to move to new premises/locations and do continually refurbishments of existing outlets - Robinsons come to mind.

4) Clients who drop out of the region or change Interior Fit-Out contractors.

For 1) and 3), they represent the "recurring" portion of Kingsmen's business, and I dare say for 1) the segment can grow further as a result of more luxury brands setting up in the region and doing roll-out Management programs with them only serves to enhance Kingsmen's long-term relationship with them.

For 2), it is hard to predict if such clients will use Kingsmen for their second outlet, or whether it is a one-off outlet.

4) is the most worrying, and shows the client drop-out rate for Kingsmen or loss to other competitors.

Kingsmen should give a breakdown in % terms of all their clients belonging to each category, and give an estimate of how many clients drop out each year. This may give an indication on the resilience of this business division, and also give a flavour of its growth prospects.

Fixtures Export is another important segment of Interiors, and hopefully Kingsmen can do better this year compared to last year.

Good results. I get to know this stock from valuebuddies and I am glad it has not let me down.

KINGSMEN’S 1H 2012 NET PROFIT JUMPS 23.5% TO S$7.2 MILLION
- Strong performance despite weak global economy
- Revenue jumps 26.9% to S$117.8 million
- Growth driven by all business divisions
- Proposes interim dividend of 1.5 cents per share

http://info.sgx.com/webcoranncatth.nsf/V...6002F21C6/$file/Kingsmen1HFY12NRFINAL.pdf?openelement

http://info.sgx.com/webcoranncatth.nsf/V...6002F21C6/$file/KingsmenSGXAnnouncementQ212FINAL.pdf?openelement

(10-08-2012, 06:28 PM)Some-one Wrote: Good results. I get to know this stock from valuebuddies and I am glad it has not let me down.

KINGSMEN’S 1H 2012 NET PROFIT JUMPS 23.5% TO S$7.2 MILLION
- Strong performance despite weak global economy
- Revenue jumps 26.9% to S$117.8 million
- Growth driven by all business divisions
- Proposes interim dividend of 1.5 cents per share

http://info.sgx.com/webcoranncatth.nsf/V...6002F21C6/$file/Kingsmen1HFY12NRFINAL.pdf?openelement

http://info.sgx.com/webcoranncatth.nsf/V...6002F21C6/$file/KingsmenSGXAnnouncementQ212FINAL.pdf?openelement

Yes it is! Cash flow from ops for 1HFY2012 is more than most of previous FYs! Margins dipped though. Company being conservative giving only 1.5 cents/share div. But I'm not complaining. Thanks to dydx for highlighting this company!

I believe Kingsmen's 1H/2Q results are in the very good category - and reading through their disclosure this evening, in addition to the highlights mentioned by Some-one in his posting of earlier on, there are four features which I found particularly pleasing, ranked in order...............

+ve: The increase in revenue resulted from superior top-line performance across all of Kingsmen's operating divisions.
+ve: In Q2 2012 the Exhibitions and Museums division in particular did very well - this division generated a ~ 43.5% higher revenue vs. 2Q 2011 (1H 2012 revenue from this division was ~ 55% higher than in 1H 2011). This E&M division was the star performer and it was good to see Kingsmen speaking to likely further successes from this division in the outlook narrative in the bottom half of page 14.
+ve: The Interiors division recorded ~ 10% higher revenues quarter on quarter. Kingsmen described revenue generation from this division as "stable", and it was interesting to note the blue-chip brand names they quoted as key , i.e. Abercrombie and Fitch, Aldo, Burberry, Coach, Fendi, H&M, Hollister, LVMH, Marks and Spencer, Polo Ralph Lauren, Swarovski and Uniqlo.
+ve: The order book for the remainder of FY 2012 bodes well for full year results: QUOTE As at 10 August 2012, we have been awarded contracts of approximately S$238 million for completion in FY2012. With the strong pipeline of contracts and demand for our services, we are confident to do well in FY2012, barring unforeseen circumstances UNQUOTE

The narrative in the bottom two-thirds of Page 12 and bottom half of page 14 of Kingsmen's Results Report is really worth the read. I would encourage those vested and those potentially interested to have a five minute read.

I note there have been significant cost and expense increases (e.g. ~ 21.5% increase in salaries) - but it looks like this was driven by a higher level of revenue-generating activity, i.e. good opex. I hope I have read this correctly. I can't see a major negative.

Kingsmen's dividend yield is currently ~ 5.8% p.a. While I had some hope for more than an interim S$ 0.015 payment, I can live with that!

Vested,

(10-08-2012, 06:28 PM)Some-one Wrote: Good results. I get to know this stock from valuebuddies and I am glad it has not let me down.

KINGSMEN’S 1H 2012 NET PROFIT JUMPS 23.5% TO S$7.2 MILLION
- Strong performance despite weak global economy
- Revenue jumps 26.9% to S$117.8 million
- Growth driven by all business divisions
- Proposes interim dividend of 1.5 cents per share

http://info.sgx.com/webcoranncatth.nsf/V...6002F21C6/$file/Kingsmen1HFY12NRFINAL.pdf?openelement

http://info.sgx.com/webcoranncatth.nsf/V...6002F21C6/$file/KingsmenSGXAnnouncementQ212FINAL.pdf?openelement

Kingsmen released quite a surprisingly strong set of results this evening.

Revenues for 2Q 2012 were up +25% yoy, and for 1H 2012 they were up 27%, mainly contributed by the M&E Division which saw a significant 43.5% increase in revenues for 2Q 2012 yoy. Interiors also showed slow but steady growth, with revenues rising 10.4% yoy for 2Q 2012 and 6.6% for 1H 2012. Nothing was mentioned about fixtures export though, but from the brand names mentioned, one can note that some of these names are in expansion mode in Singapore (and possibly SEA) like H&M, Marks and Spencer and Uniqlo to name a few. Of course, there was a spike in M&E this year due to the presence of more events in 1H 2012 compared to 1H 2011, but moving forward as Singapore becomes more of a MICE hub I am confident the volume of M&E activity will remain elevated.

GP margin dropped to 27.5% for 2Q 2012 (from 29%) and though this was not elaborated on, I believe it is due to more revenues coming from the lower margin M&E Division. Interiors generally has higher gross margins but the volume of work cannot be compared to M&E. However, Interiors Division did make up about 50% of revenues while M&E took up 43% for 2Q 2012. For 1H 2012, the proportion was about 47% and 44% respectively.

Staff salaries and other expenses increased at a slightly faster rate than gross profit, but this was mitigated by the much better performance of Kingsmen's associates, posting share of profits of $413k against $85k a year ago for 2Q 2012. This helped to push net profit up 15% yoy for 2Q 2012 and 23.5% yoy for 1H 2012.

The Balance Sheet remains clean with a chunk of Receivables converted to cash and some of the loans being paid off, while Cash balances have increased to a new record high of $49.3 million, up from $33.2 million 6 months ago.

Cash Flows were also very strong for 2Q 2012, with FCF of $10.6 million generated in addition to the $11m in 1Q 2012; so 1H 2012 saw FCF of close to $21.6m. Dividends paid out amounted to just $4.8m (2.5c/share final for FY 2011), and the upcoming interim dividend of 1.5c/share will see cash outflows of just $2.88m. So 1H 2012's cash flows alone could support the interim and final dividends nearly 3x over!

As mentioned, interim dividend declared was 1.5c/share, unchanged from 1H 2011. The apparently strong cash flows and lack of an increase in dividend payout has made me wonder if Kingsmen is hoarding the cash for some other use? Some possibilities could be i) capital required for setting up new offices overseas, ii) Building of new factories or warehouses as part of their regional expansion plans, iii) More working capital required for their theme parks bidding in China planned for 2013; or iv) a potential M&A transaction. Whatever the case, payout ratio has fallen to 40% from last year's 48%.

Annualized ROE was about 21% (using June 30, 2012 equity as a base) and EPS was 3.79c/share for 1H 2012. Annualizing the EPS is not recommended as 2H is seasonally better for Kingsmen than 1H. Using Fy 2011 as comparison, EPS for FY 2011 was 8.56c while EPS for 1H 2011 was 3.08c, which means EPS for 2H 2011 was 5.48c. If we apply this conservative 5.48c to 2H 2012, we get a total EPS of 9.27c/share. At today's closing price of 69.5c, Kingsmen is trading at a forward PER of about 7.5x. I believe PICO (3x larger) is trading at around 8x to 8.5x. So this seems like a fair value for Kingsmen at the moment.

Total contracts awarded up till 10 Aug 2012 was $238m, which compares favourable to $197m last year, of which $178m would be recognized in FY 2011. (For 1H 2010, this number was $187m and $173m respectively).

The dividend will be paid on September 24, 2012 (Monday).

Till 10 Aug 2012 total orders won was $238m.
FY2011 total Revenue was $261m.
They basically just need to get another $23m to level up last year revenue.

New orders won in Q3 FY2011 (10 Aug 2011 - 9 Nov 2011 to be exact) was $57m.
That was just Q3, last year Q4 orders was outstandingly more than $100m.

In very rough calculation, at least we should see double digit growth in top line this year.
As long as the costs are controlled, bottom line should be double digit as well.
More dividends coming? finger crossed.

Quote:I note there have been significant cost and expense increases (e.g. ~ 21.5% increase in salaries) - but it looks like this was driven by a higher level of revenue-generating activity, i.e. good opex. I hope I have read this correctly. I can't see a major negative.

As long as net profits rise in a commensurate manner, an increase in salaries should not be a big problem.

Management has said before that they target a conservative net margin of 6% for shareholders. If division managers manage to achieve >6% net margins, they will be rewarded with significant bonuses. Since net margin for 2Q12 is 7.4%, we can expect staff costs to have risen significantly. While it may be nice to imagine what net margins would be like if those bonuses were not dished out, we cannot be sure that without those bonus systems in place, the increase in net margins would still be achieved.

Kingsmen has a good business, shareholder-conscious managers and had favourable tailwinds in their industry for the past few years. Their listing status is merely a means for promoting the company to secure bigger clients and to land bigger contracts. Passive shareholders can be grateful that they are willing to share their business with the investing public and fly the flag for Singaporean businesses. The company actually does not need much capex or large doses of equity funding.

Good business -> good for shareholders
Shareholders help to keep the share price up -> (hopefully) raise the profile of the company -> good for business
Win-win.

Let's just hope they do not privatize it too soon. There is definitely room for the company to grow much more.

From: The Business Times

*Please refer to the website for the full article.

The Business Times
Published August 11, 2012
Kingsmen Q2 profit rises 15.3% to $5.17m
By Ven Sreenivasan

COMMUNICATIONS and events group Kingsmen Creatives boosted its second-quarter attributable profit by 15.3 per cent to $5.17 million from $4.5 million a year earlier, as revenue rose 25 per cent to $70.89 million this year.

For the fiscal first half ended June 30, 2012, profit rose 23.5 per cent over the year to $7.24 million from $5.86 million. Revenue in the same period rose 27 per cent to $117.81 million from $92.84 million a year earlier.

The biggest contributor remained the exhibitions and museums division, whose revenue was $30.5 million during the April-June quarter, an increase of 43.5 per cent from $21.3 million a year earlier.

It successfully completed key projects such as works for Hong Kong Disneyland, Art Stage, Singapore Airshow, Asia Pacific Maritime, Yeosu World Expo, Tax Free Asia Pacific and Food & Hotel Asia.

Works at Gardens by the Bay in Singapore, Guangzhou Hengda Exhibitions Centre, Hong Kong Maritime Museum and Sotheby's Visitor Centre in Hong Kong are ongoing, while new parcels of works for Universal Studios Singapore have started.

Kingsmen's Interiors division also performed well, recording higher revenue of $55.4 million in H1, up from $52 million last year. Key contributors to the division include Abercrombie and Fitch, Aldo, Burberry, Coach, Fendi, H&M, Hollister, LVMH, Marks & Spencer, Polo Ralph Lauren, Swarovski and Uniqlo for shop fit-out and fixture roll-out across Asia and the world.

Benedict Soh, executive chairman of Kingsmen, attributed the strong performance in the first half to the company's efforts to broaden its business and client base in the exhibitions, thematic, interiors, design and alternative marketing businesses, despite the weak global economy.
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(11-08-2012, 12:19 AM)D123 Wrote: Management has said before that they target a conservative net margin of 6% for shareholders. If division managers manage to achieve >6% net margins, they will be rewarded with significant bonuses. Since net margin for 2Q12 is 7.4%, we can expect staff costs to have risen significantly. While it may be nice to imagine what net margins would be like if those bonuses were not dished out, we cannot be sure that without those bonus systems in place, the increase in net margins would still be achieved.

Hi D123,

If we remove the effetcs of the share of profits from associates, net profit from core business was $4,754k, which gives a net margin of 6.7%, still around the 6% range. Incentivisation, I believe, will only occur if Kingsmen's employees from the various divisions can deliver a much more stellar showing that the 6% to 7% range, possibly 7+%?

Regardless, cash flow looks very strong and hopefully Kingsmen can clinch some good contracts in China theme parks, which would require consistent refurbishment (just like our USS) to add new attractions. This would constitute a viable source of recurring revenues going forward, and help Kingsmen to achieve a new baseline for top-line.

Recall too that Benedict Soh mentioned doubling the company's revenues by 2015 (from 2010). I've got FY 2010 revenues at $235.2m, and 1H 2012 revenues have hit $117.8m, so annualizing would give a figure closeer to $235m (same!), though seasonally we should expect 2H 2012 to be stronger, therefore a revenue figure of $250m would not be too far off. Still, it's a long way off from his target of "doubling", which would mean about $470m in revenues by 2015.

Let's see how things go. Investing can be a huge amount of fun, plus I am glad it is also financially rewarding in terms of passive income.