Kingsmen Creatives

[dzwm87]

A lot of hope rest on this statement from FY2019 commentary:

"The Group is taking proactive steps to minimise overheads, and reassess its operations and staff structures....." 

I wouldn't depend too much on this statement. What do you expect them to say?

[sgmystique]

From a high of $1.06 (in 2015) to today's share price 28.5 cts, Kingsmen is trading at 0.5 P/B with cash ($65m) > market capitalisation ($57m). 

You would also need to take into account that Kingsmen has 

Short term debt = $13.316 mil and 
Long term debt = $20.156 mil

Just talking about the cash balance might not give the right picture....

[GenS70]

From a high of $1.06 (in 2015) to today's share price 28.5 cts, Kingsmen is trading at 0.5 P/B with cash ($65m) > market capitalisation ($57m). 

You would also need to take into account that Kingsmen has 

Short term debt = $13.316 mil and 
Long term debt = $20.156 mil

Just talking about the cash balance might not give the right picture....

yes net cash per share is 15.6c

[Mushy]

I previously shared that I had visited the nerf exp centre. I visited again this week. All my visits (5 times) were around lunchtimes on weekdays from Nov 19 till Mar 20. My sample size is small and restricted to such timings.
Previously there will always be some customers. Sometimes I see groups. Usually not crowded but will have at least a dozen customers.
During this week visit, there was ZERO customer. The opening hours had been reduced which is in line with what we see in many shops and malls. As a comparison, there was also zero customers in Kiztopia and porroro park which are all at the same mall. I have a 5 year old and I am familiar with these kids play centres as well as the current parents preference of avoiding public play areas.

So Kingsmen IP ventures seem to have hit a big wall. So far the deal with venture high to open nerf centres in China had been cancelled. Their first and only centre will experience much less customer while paying the overheads. Previously it was reported they are looking to open the first centre in US in late 2020-2021. With the covid19 situation in US growing exponentially now, the outcome might not be positive. Either delay or cancelled altogether. They definitely need to hold on tight to their cash and not pay out dividends this year. For long term shareholder (except those that made dividends an impt part of their investment) this seems correct. If covid19 last long enough (beyond summer which is generally expected), maybe all those plans for nerf and toybox ventures will never materialize.

Management not aligned with shareholder interest? I never lookout for this in publicly listed companies. Management honesty and fraudless is good enough.

Just want to be upfront that I am an existing shareholder who had bought more shares this past week and I would like to encourage more sharing of the negative bad things for Kingsmen Creatives. I did read through most of the earlier pages in this thread and so much good stuffs had been shared. I intend to buy more shares over the next 2 quarters as I believe the results will be bad and the share price will be driven even further down. I believe it is still a decent company that will not go bust and there is a fair price to pay. The old business of it is definitely suppressed but will also definitely turn around later.

[karlmarx]

The two principals, who each own 23% of the company, are getting on in age. Benedict Soh will be turning 71 this year, while Simon Ong will be 67.

There is no single controlling shareholder, and so the shareholding is fragmented. This creates an opportunity for third parties to acquire the company.

But if the company is not able to find a buyer -- for whatever reason -- then there is the question of company leadership. Who is going to carry the torch?

KC is not a family-controlled company, and save for Ong's brother, who is 62 years old, there are no other family relatives in the company.

While a so-called succession plan is already under way, the CEO ultimately does not own the company, and may not act in its long-term interest. In the event that Soh and Ong are no longer around, will the board be able to safeguard the interests of the company?

So at the very least, the future board representative of Soh and Ong's stake will have to be saavy enough to know how to direct the company, and hire/fire the right people. Who will these board representative be, and will they be able to do the job? If yes, then maybe the company will do okay. If not, you can imagine the worst.

These points are, of course, not new, and have been mentioned years ago, at least in passing, in this thread. The counter argument then was that KC could be privatised, or sold to a third party. Maybe that is around the corner. I don't know.

For KC to be privatised, it will mean that either Soh, Ong, or both, intend to continue working on it. Or have someone in their family to continue working on it. What is the likelihood of either?

Since KC's business does not rely on physical or intellectual assets, a competitor who isn't in a rush to build its customer base will have no urgency to acquire them. A competitor with time and money can slowly price KC out of the market, while also poaching their talents. This is less risky than taking the financial commitment required of an acquisition. And also cheaper.

So if KC were to be purchased, the buyer may more likely be a PE, than anyone else. Though, the PE will likely also have concerns about their exit strategy.

===

Okay, so KC is not a 'free' company now that some have pointed out that the net cash is much lower than market cap. This suggests that the market still thinks that the company may make a come back.

If KC's present share price was offered, say last year when the markets are generally more expensive, I will think a small purchase may be sensible. But today, a bargain hunter has plenty of other options to choose from, with many of them offering high(er) yields.

So KC has to be attractive not only on its own merits, but also against the other prospects.

[dydx]

Since both Soh and Ong are at retirement age, and they have not prepared their siblings to take over, it is conceivable that they would choose to divest their combined controlling interests eventually. When this happens, it is conceivable that a deal would be done with an acceptable party to take this well established regional business forward, and likely at a price above its revised NAV.

[karlmarx]

Courts Asia was bought by Nojima -- a Japanese retailer -- just a year ago at $0.205 per share. This represents a 45% discount to its NAV, and 73% discount to its IPO price.

The deal came and went quietly, without any audible complaints from opmi.

https://www.businesstimes.com.sg/compani...ourts-asia

When assets are distressed, the sellers will not be in a position to negotiate, and so investors have to temper their expectations of what they think their assets can fetch on the market.

===

So the trade sale of KC is really two questions:

1) Who are the possible buyers?
2) At what price will they pay?

So let's invert this. If you were a manager of a $1b PE fund, and you're looking for something to buy. Does paying $115m -- which is KC's NAV -- to have 100% (or somewhere close to that) ownership of KC, sound like a good deal? Do you know of someone capable to run it? And how will you later offload it? Are there not other companies on sale with better value proposition?

A trade sale is certainly possible. But I wouldn't be too optimistic about a 'good' price.

[weijian]

Courts Asia was bought by Nojima -- a Japanese retailer -- just a year ago at $0.205 per share. This represents a 45% discount to its NAV, and 73% discount to its IPO price.

The deal came and went quietly, without any audible complaints from opmi.

https://www.businesstimes.com.sg/compani...ourts-asia

When assets are distressed, the sellers will not be in a position to negotiate, and so investors have to temper their expectations of what they think their assets can fetch on the market.

===

So the trade sale of KC is really two questions:

1) Who are the possible buyers?
2) At what price will they pay?

So let's invert this. If you were a manager of a $1b PE fund, and you're looking for something to buy. Does paying $115m -- which is KC's NAV -- to have 100% (or somewhere close to that) ownership of KC, sound like a good deal? Do you know of someone capable to run it? And how will you later offload it? Are there not other companies on sale with better value proposition?

A trade sale is certainly possible. But I wouldn't be too optimistic about a 'good' price.

Since we are talking about Courts, it would be probably useful to look at the discount that Courts got delisted then.

as per VB: https://www.valuebuddies.com/thread-2409...l#pid33643

Of course, the timeframe then was close to GFC08. But one can say that this can be considered an attractive target for a PE to strip its cash and then leverage to the max for a future IPO. Of course, if the bosses are purists, i don't think they will allow dirty capitalists to contaminate their brain child!

[brattzz]

I would think it was bad luck to launch NERF and then hit by COVID19...until i saw straco, who has to shut down it's cash generators!! :O :O

bad timing, bad luck... does it break KC? not yet,
Buy-out / sell-out? neither an attractive biz in a flat/declining biz environment too....

would think it will just move along slowly...paying for the losses Q by Q... waiting for next up cycle...

slow accumulation excepted... value will be come when prices are depressed for sure...

[random85]

I was looking at their FY2019 news release and thinking about how COVID-19 would affect KC.
Suspect KC will be in real tough times if COVID-19 persists.

Nearly all of their revenue comes from a) Exhibitions & Thematic division and b) Retail & Corporate Interiors division.

For Retail & Corporate Interiors, things may look up once people get less fearful and start coming out to the shopping malls again.
However, a lot of KC's clients seem to be in the luxury segment (e.g. Tiffany and Co) which I suspect is heavily tourism dependent.

For Exhibition & Thematic, I just cannot see how these exhibitions and events proceed if COVID-19 persists.
Examples of events which KC did in FY2019 include Formula 1 Singapore Grand Prix, National Day Parade, Singapore FinTech Festival.
SG Government has already had proposals and rules around mass gatherings of over 250 people due to COVID-19.

Just my two cents.