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Hi RBM,
Thank you for your write-up on both Pico FE (a key competitor of Kingsmen) as well as your views on Kingsmen. Let me address some issues:-
1) Kingsmen had already kept their interim dividend constant at 1.5c/share, so I doubt there would be an increase in the final dividend to >2.5c/share. My take is that if they wanted to rase total full year dividends they would have done so at the interim stage while keeping final constant. I could be wrong, let's wait and see. Or else they may also do what they did in FY 2010 - declare a special dividend of 0.5c in addition to a final dividend, labelling it as "one-off".
2) I think we have to recognize that Pico FE's capabilities are more towards M&E (mega-events) and their Interiors division is much smaller as a revenue contributor. Kingsmen, on other hand, has a burgeoning Interiors portfolio of loyal and repeat customers who require refurbishment/expansion. Therefore, it would look as though Pico FE is clinching the mega-events and leaving kIngsmen in the dust - two points should be brought up here - Kingsmen is about 1/3 the size of Pico and so cannot undertake the more mega-projects, they do not have the scale and no desire to do these large projects which involves a lot more complexity and manpower. Kingsmen is also much "weaker" in China compared to Pico FE, as they are still building up their presence there (with the recent announcement of a setup in Kunshan, China). Note that Pico FE's customer base and contracts are mainly China/HK-centric while Kingsmen has a core diversified geographic base (with Singapore and Malaysia taking up the bulk of Interiors). So I won't worry too much about Pico's mega new factories as the pie is growing larger for all players.
3) Kingsmen also will take on lower margin projects from time to time. The 2009 USS project was one of them - as they needed the boost to be able to manage and claim they have successfully delivered on a theme park project. KIngsmen may have to sacrifice a little margin in order to build up a solid reputation for quality and reliabilty - I am perfectly OK with this if it builds up and cements long-term relationships with potential key clients. In the theme park space, there are many developements coming up with Philippines announcing a casino/integrated resort plan, Sentosa's Kidzania and Malaysia having more plans to expand their theme parks (I read that a theme park resort company in Malaysia wants to IPO to raise funds for further expansion).
4) Finally, I won't really worry myself too much over share price movement or to fret over Kingsmen's supposedly "laggard" status with respect to the recent penny-stock rally. My view is that the rally affected many speculative companies, some with business models which may not sustain over the long-term, while others have yet to show a profit. Kingsmen, being a slow and steady company, was understandably overlooked in the mad rush for the lottery. As long as its business is growing and expanding steadily, I have no qualms remaining a shareholder.
Interesting for Pico FE to reduce their dividend though, did they mention the reasons for doing so? The thing about companies is that they are not obligated to pay a dividend at all, much less increasing dividends over the years. With you mentioning that Pico FE needs to build mega-factories in Beijing and Shanghai, perhaps they needed more of the cash for expansionary capex? Kingsmen may not require such heavy capex as their fabrication facilities are currently located in both Malaysia and Singapore and would be sufficient for their volume of work now.
Happy Lunar New Year to you!
Thank you for your write-up on both Pico FE (a key competitor of Kingsmen) as well as your views on Kingsmen. Let me address some issues:-
1) Kingsmen had already kept their interim dividend constant at 1.5c/share, so I doubt there would be an increase in the final dividend to >2.5c/share. My take is that if they wanted to rase total full year dividends they would have done so at the interim stage while keeping final constant. I could be wrong, let's wait and see. Or else they may also do what they did in FY 2010 - declare a special dividend of 0.5c in addition to a final dividend, labelling it as "one-off".
2) I think we have to recognize that Pico FE's capabilities are more towards M&E (mega-events) and their Interiors division is much smaller as a revenue contributor. Kingsmen, on other hand, has a burgeoning Interiors portfolio of loyal and repeat customers who require refurbishment/expansion. Therefore, it would look as though Pico FE is clinching the mega-events and leaving kIngsmen in the dust - two points should be brought up here - Kingsmen is about 1/3 the size of Pico and so cannot undertake the more mega-projects, they do not have the scale and no desire to do these large projects which involves a lot more complexity and manpower. Kingsmen is also much "weaker" in China compared to Pico FE, as they are still building up their presence there (with the recent announcement of a setup in Kunshan, China). Note that Pico FE's customer base and contracts are mainly China/HK-centric while Kingsmen has a core diversified geographic base (with Singapore and Malaysia taking up the bulk of Interiors). So I won't worry too much about Pico's mega new factories as the pie is growing larger for all players.
3) Kingsmen also will take on lower margin projects from time to time. The 2009 USS project was one of them - as they needed the boost to be able to manage and claim they have successfully delivered on a theme park project. KIngsmen may have to sacrifice a little margin in order to build up a solid reputation for quality and reliabilty - I am perfectly OK with this if it builds up and cements long-term relationships with potential key clients. In the theme park space, there are many developements coming up with Philippines announcing a casino/integrated resort plan, Sentosa's Kidzania and Malaysia having more plans to expand their theme parks (I read that a theme park resort company in Malaysia wants to IPO to raise funds for further expansion).
4) Finally, I won't really worry myself too much over share price movement or to fret over Kingsmen's supposedly "laggard" status with respect to the recent penny-stock rally. My view is that the rally affected many speculative companies, some with business models which may not sustain over the long-term, while others have yet to show a profit. Kingsmen, being a slow and steady company, was understandably overlooked in the mad rush for the lottery. As long as its business is growing and expanding steadily, I have no qualms remaining a shareholder.
Interesting for Pico FE to reduce their dividend though, did they mention the reasons for doing so? The thing about companies is that they are not obligated to pay a dividend at all, much less increasing dividends over the years. With you mentioning that Pico FE needs to build mega-factories in Beijing and Shanghai, perhaps they needed more of the cash for expansionary capex? Kingsmen may not require such heavy capex as their fabrication facilities are currently located in both Malaysia and Singapore and would be sufficient for their volume of work now.
Happy Lunar New Year to you!
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/