Thanks for offering to post info on the talk at Invest Fair today. Will look forward to your post on this in your blog.
As for Mr. Market getting more manic on Kingsmen, I think it's pretty unlikely unless there are further reasons for him to get overly pessimistic. But I agree that we should watch and wait for such opportunities in order to pounce on them!
Many thanks for your detailed and wonderful write-up and I really appreciate the hard work and efforts you put in to personally visit Kingsmen's booth as well as speak to Andrew Cheng.
I'd just like to address a few points in your writeup:-
1) If Andrew says that Kingsmen's designers are "pretty stretched", how is it that they intend to bid for so many theme park projects and yet be able to cope with the perceived increase in volume (of work)? It sounds contradictory that on one hand, Kingsmen wants to focus on its Interiors business which is more "recurring" in nature and less "lumpy" compared to M&E; then again thematics are supposed to be an area of growth for Kingsmen in the near-term. How do you think Kingsmen will juggle this based on your gut feel?
2) With more alternative media being used now and more clients wanting a "holistic" package of services, is IMC and Research and Design divisions poised to grow further? 1H 2011 numbers were quite good for these divisions - but did Andrew elaborate on whether Kingsmen would continue to grow these two divisions?
3) Any news on how their associate companies are doing? So far I feel this is an area lacking for Kingsmen - their associates are not contributing much profit or cash and some are even in the red. Any plans to beef up this area?
4) I feel that Andrew's comment that Kingsmen cannot guarantee share price appreciation a little odd. Unless he thinks the business has no room for growth, why should he worry about how Mr. Market plans to price the business? At least he can assure a steady dividend yield and a "stable business", but does this mean he perceives growth to be flat or even negative? Could it be that he worries about the troubles in USA and Europe may spill over to Asia? What's your take on this?
Many thanks for your detailed and wonderful write-up and I really appreciate the hard work and efforts you put in to personally visit Kingsmen's booth as well as speak to Andrew Cheng.
I'd just like to address a few points in your writeup:-
1) If Andrew says that Kingsmen's designers are "pretty stretched", how is it that they intend to bid for so many theme park projects and yet be able to cope with the perceived increase in volume (of work)? It sounds contradictory that on one hand, Kingsmen wants to focus on its Interiors business which is more "recurring" in nature and less "lumpy" compared to M&E; then again thematics are supposed to be an area of growth for Kingsmen in the near-term. How do you think Kingsmen will juggle this based on your gut feel?
2) With more alternative media being used now and more clients wanting a "holistic" package of services, is IMC and Research and Design divisions poised to grow further? 1H 2011 numbers were quite good for these divisions - but did Andrew elaborate on whether Kingsmen would continue to grow these two divisions?
3) Any news on how their associate companies are doing? So far I feel this is an area lacking for Kingsmen - their associates are not contributing much profit or cash and some are even in the red. Any plans to beef up this area?
4) I feel that Andrew's comment that Kingsmen cannot guarantee share price appreciation a little odd. Unless he thinks the business has no room for growth, why should he worry about how Mr. Market plans to price the business? At least he can assure a steady dividend yield and a "stable business", but does this mean he perceives growth to be flat or even negative? Could it be that he worries about the troubles in USA and Europe may spill over to Asia? What's your take on this?
Thanks!
Hi MW,
1) I was thinking the exact same thing and that's why I asked Andrew the question. They are pursuing many theme park projects but are also saying interiors will bring in more business going forward. Like he said, they have separate heads for these two businesses and they won't overlap.
2) Yes, the new growth will come from alternative marketing as it's increasing in revenue. They are focusing more on that if I don't remember wrongly.
3) No news on that.
4) I think what he means is that he and the management have no powers to directly manipulate the share price and they will not do so. In the meanwhile while share price appreciates in the long-term due to good business, what they can guarantee is good dividends of 1.5 cents (half yr) and 2 cents (final). You are right if the business is doing well, Mr Market will price it accordingly for the long-term. If the crisis does spill over, the exhibitions business will be hit the most and the interiors business not that much as the retailers plan way in advance for refurbishment, etc.
14-08-2011, 06:07 PM (This post was last modified: 14-08-2011, 06:08 PM by freedom.)
(11-08-2011, 06:04 PM)Musicwhiz Wrote: Dear all, Part 5 of my comprehensive analysis of Kingsmen is now up on my blog. Please feel free to visit and leave comments, thanks!
A snippet as follows:-
"Kingsmen is currently trading at a historical FY 2010 PER of 7.2x (EPS of 7.93 cents for FY 2010, last done price at 57 cents/share). Assuming the same valuation was accorded to it as the Cityneon buy-out 3 years ago (at 12.7x), Kingsmen’s fair value should therefore be in the range of $1.007. This would value the entire company at about $190 million (189.381 million issued shares), which still seems cheap compared to its cash generation potential, strong track record and capable Management Team."
Kingsmen also released their latest 1H 2011 results this evening, and declared a 1.5c/share interim dividend (unchanged from last year). Will analyze the results and post here when ready.
Kingsmen has an associate called Enterprise Sports Group Pte Ltd, which deals with sports event related business.
17-08-2011, 04:39 PM (This post was last modified: 17-08-2011, 05:01 PM by RBM.)
Thank you for sharing these two analyst reports Musicwhiz - interesting reads. I can not help comparing the two reports - in particular how short-termist the perspective of the OCBC analyst is; the Kim Eng report goes out until 2013, so it does look somewhat further ahead. OCBC appears not value Kingsmen's medium to longer term. May be this explains why Kim Eng ranks the stock a "Buy" and OCBC a "Hold". May be. I am vested and admit to a bias.
(17-08-2011, 04:39 PM)RBM Wrote: I can not help comparing the two reports - in particular how short-termist the perspective of the OCBC analyst is; the Kim Eng report goes out until 2013, so it does look somewhat further ahead. OCBC appears not value Kingsmen's medium to longer term. May be this explains why Kim Eng ranks the stock a "Buy" and OCBC a "Hold". May be. I am vested and admit to a bias.
Hi RBM,
I guess the analysts have to come up with some sort of recommendation, be it BUY, HOLD or SELL. The problem is always in the time horizon, as most analysts do not take a sufficiently long-term view of the business; and most also do not stress very much on cash flows but mostly focus on profits, dividends and margins.
For Kingsmen, I reckon a time horizon of at least 5 years (up till 2015) is required, as the original 5-year aim of Ben Soh was to double revenues - he mentioned this back in 2010. While 2011's performance thus far is lacklustre, there's still a long way to go till 2015 and Kingsmen continues to build up its capabilities, competencies and client base slowly and steadily. Cash flow generation is still healthy and moving forward, assuming Kingsmen can clinch some thematic projects + VO for existing theme parks, and if Interiors continues to perform strongly (especially their fixtures export), there is no reason to believe the Company will not increase the dividend some time in the future, or that Mr. Market may accord it a higher valuation.
This article talks about H&M and Ambercrombie & Fitch, which are both done up by Kingsmen.
The Straits Times
Aug 25, 2011 New fashion entrants to shake up Orchard Road Other retailers brace themselves for H&M, Abercrombie & Fitch
By Huang Lijie
FASHION shops in Orchard Road are bracing themselves for a shake-up when popular apparel chains H&M and Abercrombie & Fitch debut here soon.
Retailers The Straits Times interviewed said the launch of the first South-east Asian stores by both brands will likely fuel a craze among shoppers that may last as long as nine months.
The opening of these two sprawling flagship stores is also expected to shave as much as 30 per cent from the revenue of existing fashion players initially, according to retail industry analysts.
Faced with such stiff competition, some retailers are pulling out all the stops to woo customers by launching new brands and beefing up service standards.
Some, however, have chosen to downsize operations or simply wait for the dust to settle.
When Swedish fast-fashion retailer H&M opens its three-storey, 33,000 sq ft shop at Orchard Building on Sept 3, it will be the largest high-street fashion store here.
Currently, American brand Forever 21 holds that title, with its 22,000 sq ft flagship store at the Orchard Exchange that opened in June.
In December, American casualwear brand Abercrombie & Fitch will debut its 21,000 sq ft store spanning four floors at the Knightsbridge mall.
With such keen competition, Mr Chua Shenzi, director of casualwear brand NewUrbanMale, closed 15 of its 17 outlets this year to 'consolidate' its business.
He said: 'The opening of big 'cheap and chic' brands like Forever 21 and H&M has shrunk our business here and the best strategy for us is to expand overseas where we are presented with opportunities to open franchise stores.'
It is opening four outlets this year in Taiwan, Malaysia, the Philippines and Indonesia.
He said NewUrbanMale, however, will continue to grow its brand here by launching a new clothing line in its stores and expanding its range of merchandise to include stationery.
Others, like fashion chain bYSI are adopting a wait-and-see approach.
The chain's business development manager, Mr Jonathan Cheng, said it is eyeing expansion in Orchard Road, but plans to see how the two mega-stores in the Somerset area will affect shopper traffic in nearby malls before deciding on where to open a store.
The Jay Gee Group, which carries brands such as denim jeans store Levi's and British high-street label New Look, is not holding back on its expansion.
It is launching the popular American casualwear brand Aeropostale next month with two outlets at VivoCity and CityLink Mall. It is also opening its fifth New Look outlet at CityLink Mall this week.
Jay Gee's managing director, Mr R. Dhinakaran, said he is optimistic about the company's business growth because it has built up a strong and supportive customer base over the years.
He added: 'We have seen Singaporeans go after new brands and queue up for them, but after the honeymoon, interest in the brands evens out.'
Ms Lau Chuen Wei, executive director of the Singapore Retailers Association, welcomed the competition as an impetus for local retailers to step up their game with better merchandise, more attractive price points and savvier marketing efforts.
Mr Steven Goh, executive director of the Orchard Road Business Association, said the entry of these big brands will cement Singapore's reputation as a shopping haven. He added that the location of the two brands in the Somerset area will help the cluster become as bustling as the other end of Orchard Road dominated by luxury brands in busy malls such as Ion Orchard and Ngee Ann City.
But he cautioned that demand for retail staff with the opening of H&M and Abercrombie & Fitch may overstretch the already tight retail labour market and cause service standards to dip.
Still, shoppers such as account executive Ng Hwei Yun, 24, are excited about the opening of the two stores.
She said: 'I used to visit H&M stores in London and Hong Kong because I couldn't get its clothes in Singapore. Now it is opening here, I will definitely pop by.'
Are there chances of H&M opening a second store in Singapore, due to the popularity? If that is the case, Kingsmen would probably clinch this contract as well.
The Straits Times
Sep 4, 2011 H&M opens to eager shoppers Swedish high street fashion label draws thousands at launch of first SE-Asian store in Orchard Road
By Rohaizatul Azhar
There are queues and then there are queues like the one outside H&M yesterday, when the Swedish high street fashion label opened its 30,000 sq ft store in the heart of Orchard Road.
Even before the store - its first in South-east Asia - swung open its doors at 11am yesterday, a snaking line of more than 1,500 shoppers had already formed outside, looping several times between the store at Orchard Building and 313 Somerset two blocks away.
Some had started queuing the day before, hoping to be among the first five to receive $250 worth of shopping gift cards and the subsequent 10 to get a $100 card each. The 300 shoppers after that also got a $20 gift card each.
A 40-minute bout of rain yesterday morning did not deter shoppers from wanting to be among the first to step into the store, which spreads over three storeys and sells everything from colourful togs for children at $5.90 to full leather jackets for men at $349.
While some staff members let in shoppers in batches of 500, others were busy handing out umbrellas and bottles of mineral water. At least 2,000 umbrellas and 5,000 bottles of water were given away.
The turnout caught the company by surprise.
Mr Lex Keijser, H&M's country manager for Greater China and Singapore, said: 'We were afraid that no one would turn up and get in line because of the humid weather.'
The Swedish brand, known for its affordable and chic fashion, also drew long queues when it opened stores in Hong Kong and Shanghai in 2007 and in Tokyo the following year.
Those in the queue here, mostly young women and foreigners, are fans of the label who are thankful that they no longer have to travel out of Singapore to get their H&M goods.
Inside the store yesterday, there were also lines outside the changing rooms. Others combed through clothes racks filled with the brand's fall/winter 2011 collection. Among them was 19-year-old student Mohd Razif, who was one of the first five customers in the queue, which he joined at 2.30pm the day before.
Looking visibly tired, he was nonetheless intent on spending his $250 gift card and was toting a shopping bag full of apparel and accessories.
'I didn't get much sleep last night so I'm quite exhausted. But I'm trying my best to stay focused and shop for the things that I want,' he said.
The label's arrival in Singapore has been long- awaited. Four years ago, there was already talk that it was setting up shop here, but that fizzled out.
Mr Keijser said getting the right location and opening at the right time was key in its decision-making for expansion. 'It is no goal in itself to be early to enter a specific market. We want to continue to grow in a controlled manner with continued high profitability in both new and existing H&M markets,' he explained.
The last time a fashion label created similar frenzy here was when Uniqlo first opened in 2009 at the Tampines One mall.
At closing time on opening day, there were still many left in the queue but the Japanese fast-fashion retailer had to turn them away.
Homepage
PR Newswire
