Kingsmen Creatives

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.

Suddenly, this stock is now a "good buy"..

1) at a price not that far from the 0.75 it was range bound the past few months minus the recent runup
2) after an auditor filed an announcement of potentially serious financial misconduct by some possibly key people in the company
3) with further troubling signs (see settlement date of 10th Jan with subcontractor B - the auditors filed the report next day 11th Jan and they had to call a halt) not fully answered in the press release
4) and an unexplainable delay in putting together the facts of what had actually be an ongoing investigation (E&Y did not just spend 2 days to do this and filed on the 11th)

While a financial loss of this magnitude will hardly dent Kingsmen, considering that their main asset is human capital, how would they be affected if they lose some important people as a result of this crisis? Remember how HP lurched from crisis to crisis with tens of thousands of job losses now after Mark Hurd got booted out for fiddling his expenses...


Just another counterpoint to balance all the bullishness in this thread...

(18-01-2013, 02:59 PM)cif5000 Wrote: Also, do take note that the fraud was discovered by the external auditor. Without careful reading of the announcement, one may choose to believe that it was an internal cleaning up process that will strengthen the Company for it going forward.

In the course of reviewing an internal risk review conducted on the Group, the AC noted that a few
finance employees of KBJ were involved in a misappropriation of KBJ’s funds between 2009 and
2011.

Internal risk review is normally conducted by company and not external auditor. I suppose for this case, Kingsmen owned up and presented all info to external auditor for investigation. The management had already investigated the fraud and presented all info to E&Y to close this case.


The Audit Committee of the Company (the “AC”) appointed E&Y to independently investigate certain
alleged irregularities, which have been brought to the attention of the AC, involving KE, a whollyowned
subsidiary of the Company.


This is less clear. If I guess correctly, Kingsmen owned up for the first case and subsequently, E&Y decided to do a thorough auditing from 2009 to 2011 and uncovered the 2nd one.

It is also weird that subcontractor B did not pursue the payment after so long. So, the story probably did not end yet.

(18-01-2013, 04:58 PM)yeokiwi Wrote: [quote='cif5000' pid='40434' dateline='1358492362']

The Audit Committee of the Company (the “AC”) appointed E&Y to independently investigate certain
alleged irregularities, which have been brought to the attention of the AC, involving KE, a whollyowned
subsidiary of the Company.


This is less clear. If I guess correctly, Kingsmen owned up for the first case and subsequently, E&Y decided to do a thorough auditing from 2009 to 2011 and uncovered the 2nd one.

"Brought to the attention" could also have been done by a whistle-blower, perhaps someone internal.

It is sad that discussion has turned from a fair GO price to how far will this fraud investigation will go. Sad indeed!

(18-01-2013, 04:21 PM)thefarside Wrote: Suddenly, this stock is now a "good buy"..

1) at a price not that far from the 0.75 it was range bound the past few months minus the recent runup
2) after an auditor filed an announcement of potentially serious financial misconduct by some possibly key people in the company
3) with further troubling signs (see settlement date of 10th Jan with subcontractor B - the auditors filed the report next day 11th Jan and they had to call a halt) not fully answered in the press release
4) and an unexplainable delay in putting together the facts of what had actually be an ongoing investigation (E&Y did not just spend 2 days to do this and filed on the 11th)

While a financial loss of this magnitude will hardly dent Kingsmen, considering that their main asset is human capital, how would they be affected if they lose some important people as a result of this crisis? Remember how HP lurched from crisis to crisis with tens of thousands of job losses now after Mark Hurd got booted out for fiddling his expenses...


Just another counterpoint to balance all the bullishness in this thread...

Thanks for the timely warning + that from 'cif5000'... Everyone should take note and invest based on their own level of comfort. But, I actually read more fears in this thread rather than bullishness. perhaps I'm the chief culprit... Sorry...

As for 'salty', ya, nice one... I'd strongly avoid investing in Humpty in that case. But, can consider King's Men (I assume that's your pun) after doing your own due diligence ... even King's Horses (whatever that is.. E&Y???)... Perhaps I'm reading too much into your nursery rhyme...

Er? Is there going to be a further investigation report ? Or any further news on the issue...?
I'm sure some media or analyst is going to ask some questions and publish something.

Actually, as a small company, its quite hard to tell if whats being announced is what really happened. I'm more of referring to the part whereby a whistle blower discover the fraud or the auditors discovered the fraud.
Besides, such incidents are probably quite common among small companies.
Gotta ask people from the company itself or the auditors themselves (Friends from EY anybody?)

As an ex-auditor, im more inclined to believe that it was a whistleblower. Usually auditors dont look at stuff too long ago, they are auditing the current year anyway. Besides, they tend to hate to amend past year figures (or find errors in them), because it simply reflects their incompetency in the prior year. No auditors like restatement of the financial statements, unless its due to retrospective change in accounting policy.
Hence, unless the expenses turned up in the financial statements this year, E&Y probably didn't look at it.
Besides, auditors probably started auditing the final year figure (unless they did interims) earlier month, which gives them 8 business days to discover the error. Given that the actual audit usually starts a few days after (client needs to prepare the financial statement), they probably only have 5 days to 1) discover the error, 2) investigate and think carefully through, 3) prepare the report to the ministry. To me, its highly improbable that these frauds are discovered in the year-end audit.

In terms of valuations. I just think the market cap has fallen way too much beyond the fraud amount + any potential amount + $$$ to for consultant improve internal controls. No reason for falling so much. Reminds me of Standard Chartered Case last year + Sun Hung Kai Properties incident last year + Singapore property curbs. Knee-jerk reactions. keep calm and evaluate the $$$.

<2 cents worth>

(18-01-2013, 05:04 PM)Share Investor Wrote:

(18-01-2013, 04:58 PM)yeokiwi Wrote: [quote='cif5000' pid='40434' dateline='1358492362']

The Audit Committee of the Company (the “AC”) appointed E&Y to independently investigate certain
alleged irregularities, which have been brought to the attention of the AC, involving KE, a whollyowned
subsidiary of the Company.


This is less clear. If I guess correctly, Kingsmen owned up for the first case and subsequently, E&Y decided to do a thorough auditing from 2009 to 2011 and uncovered the 2nd one.

"Brought to the attention" could also have been done by a whistle-blower, perhaps someone internal.

It is sad that discussion has turned from a fair GO price to how far will this fraud investigation will go.

The case isn't clear on how the "fraud" was discovered.
But, a few points...

1) the two employees were not suspended from work(at least, it was not mentioned in the announcement).
2) It was not apparent that the two employees had benefitted since the amount were transferred to subcontractor A and B.
3) Kingsmen was withholding the payment to subcontractor B and was deemed to underpay the work done. In most fraud, the company payment is normally siphoned away.
4) The subcontractor B had done all the work but did not receive the payment and not complaining which is strange.

So, who is the fraudster??
KE Employees? but why are they not suspended if the case is outright???
Subcontractor B? they did the work but were not paid.
Kingsmen? They got the work done but they were not paying.

I think the hinge in this case is the personal guarantees which are not orthodox.

Next, CAD will investigate ...wait.

As a long time investor for kingsmen,I still believe in kingsmen. Yet how the whole things panned out is quite puzzling. There is mere 3 pages of announcement after 4 days of trading halt for the matter of fraud.
Whether you are bullish or running away from this counter, I think we all need better explanation. Just as a suggestion, why don't we gather our queries, concern and questions and bring up to management or investor relation direct?

I have pared down two-third of my holding to take profit as it was my top holding before I pared down. The reason for selling is that since there are other counters to invest the fund, why take so much risk when the impact cannot be assessed now. It is not a difficult decision to sell probbaly because my average purchased price was low. Time will tell if this is the right move. It will be a useful experience for me.