Kingsmen Creatives

[valuestalker]

There is a one-page write up on Kingsmen Creatives in this week's The Edge Singapore publication (March 16, 2013 issue).

I summarized some of the key highlights (my thoughts are in brackets):-

1) The Group is in serious discussions with several major residential developers in China and Myanmar to build attractions in their large-scale residential developments. (This is something new and potentially may form a new revenue and growth driver for the Company, assuming it pans out).

2) More growth should come from megamalls in Indonesia. Revenue from Indonesia rose >20% to $10.7 million.

3) Kingsmen plans to build a foothold in alternative marketing, tapping new technologies and media to help its clients promote their brands both offline and online. (Kingsmen provides marketing consultancy to their clients too, and this division has seen significant growth yoy, up +41.5% to $12.6 million. The sad thing is, though, that this division commands very poor margins).

4) The Research and Design division provides the back-end support for all the Group's projects, as Kingsmen understands how the design is to be translated from drawings into the physical look and feel. While revenue contribution was just $10.2 million, the margins are the best.

5) Benedict is not worried for the newbuilding - they have an option to extend it for 6 years, so they are taking their time to find the right location. Soh and Ong are keen to find a place in the same area, according to the article.

Erratum on the article - Article mentions a final dividend of 4c/share for a dividend yield of 5.1%. This is not correct - it should be a final dividend of 2.5c/share for a full-year dividend of 4c/share, translating into a yield of 4.65% according to theclosing price of $0.86 according to their article.

Hi Musicwhiz,
Thanks a lot for the info and the nice sum up.
Glad to have you as the fellow shareholder who focus on what matters (ie: The Business).

Will grab a copy of Edge later.
Just curious on point 1, do they mean to Build and Operate?
And not the usual project management, design & build?

[Musicwhiz]

Hi Valuestalker,

You're most welcome and it is good to know that there are forumers like yourself who appreciate this information.

My take on Point 1 is that they will do fabrication, design and planning for these clients, similar to what they did for USS' attractions. Although I am probably thinking along the lines of playgrounds (which are usually located in huge sprawling residential estates), perhaps there may be some theme for these zones and the developer wishes to inject this theme into the attractions, hence they will engage Kingsmen to do their research and design to conceptualize the look and physical feel and translate it into reality. Kingsmen also has their fabrication facilities in Johor and Singapore (and also China now, I believe) to churn out high quality fixtures and fittings.

So to answer your question, no I do not think it is D&B in the strict sense of the term. It will be a mixture of design, planning, project management, fabrication and installation, perhaps.

[valuestalker]

Hi Musicwhiz,

Okay, thanks for the follow up.
I was thinking along that line as well.
Operate the theme parks although is recurring but probably not their strength.

I guess it is good enough if they sign contract with big developers building mini attractions (usually water parks) for residential properties.
Margin is probably very low, hence, scale of works will be important.

Nowadays, it seems pretty common in big residential complex to have its own water parks (at least in Indonesia from what I saw).
And yes, middle class in Indonesia is rising fast and with it the consumer spending.
I notice lots of international brands are coming in (fighting for limited malls' spaces).
Note: Jakarta had applied temporary suspension of mall building permit since September 2011.

[Musicwhiz]

Hi Musicwhiz,

Okay, thanks for the follow up.
I was thinking along that line as well.
Operate the theme parks although is recurring but probably not their strength.

I guess it is good enough if they sign contract with big developers building mini attractions (usually water parks) for residential properties.
Margin is probably very low, hence, scale of works will be important.

Nowadays, it seems pretty common in big residential complex to have its own water parks (at least in Indonesia from what I saw).
And yes, middle class in Indonesia is rising fast and with it the consumer spending.
I notice lots of international brands are coming in (fighting for limited malls' spaces).
Note: Jakarta had applied temporary suspension of mall building permit since September 2011.

Hi Valuestalker,

To address your points,

1) Theme parks are becoming more and more familiar to Kingsmen, who have now worked on USS as well as Disneyland HK and Shanghai. You are right to say that these are "recurring" - I use the quotation marks because although the work is offered as parcels of work as part of a contract, every theme park is obligated to "refresh" its attractions once every 2-3 years. Hence, this provides a steady source of recurrent contracts for Kingsmen and other contractors. As the number of theme parks in Asia grows, so will this income stream. I would therefore argue that this is increasingly becoming Kingsmen's "strength".

2) I'm not sure if the installations would be water parks. I can think of other features which could be part of a large residential development and yet not water-related. Think of a playground or installation which may be theme-based or reflect a certain idea/concept. Examples may be astronomy-themed gazebos or a futuristic playground with spaceships or stations (just using my imagination as I am NOT a creative person!). But hope you get the idea I am trying to convey.....

3) As for the margins on such installations, I would not be able to comment if it would be high or low. Normally for pure fabrication and installation, I would agree margins may not be high. But if I were to assume that they involved their R&D department, then the margins could be significantly higher as indicated by their segment report.

4) Why did Indonesia suspend mall-building if there was such strong demand for malls and if it wanted to attract more international brands (essentially FDI)? Assuming the trend is for more major brands to set up in malls in Indonesia, this can only be perceived as a good thing for Kingsmen's continued growth there for their Interiors Division.

Thanks!

[valuestalker]

Hi Musicwhiz,
Some interesting points there. Thanks.

Just to have a quick answer on point4.
Temporary suspension is due to policy to protect the traditional market.
But due to that, most of the newly built malls are Megamalls (to maximize the value of precious mall license).

On separate note,
Uniqlo will be opening its first store in Indonesia in June this year.
H&M will follow with its flagship store next year.

AEON & Parkson are expanding as well (not sure if these 2 are Kingsmen's clients).

[CityFarmer]

Hi Musicwhiz,
Some interesting points there. Thanks.

Just to have a quick answer on point4.
Temporary suspension is due to policy to protect the traditional market.
But due to that, most of the newly built malls are Megamalls (to maximize the value of precious mall license).

On separate note,
Uniqlo will be opening its first store in Indonesia in June this year.
H&M will follow with its flagship store next year.

AEON & Parkson are expanding as well (not sure if these 2 are Kingsmen's clients).

Indonesia's retail market seems the focus of major retailer, with the larger middle class population in Asia.

The risk of protectionism in Indonesia has less impact on KC IMO. KC key customers are those mid to high-end retailers, rather than those general consumer retailers, which demand more protection from Indonesia gov.

[natnavi]

Hi Musicwhiz,

Thank you for the info an update. I have been shuttling between SG and ID for the past few months now, and I did noticed that there are many mall coming up in Jakarta in the past few months but I did not realized that KC was involved in these projects. It could be because I never would have thought that KC would be in ID. I will keep my eyes open for their logo when I go there again this weekend.

KC logos in Jakarta will be a sign on whether I should sink in more money into KC.

Thanks again for the info Musicwhiz.

(Vested)

There is a one-page write up on Kingsmen Creatives in this week's The Edge Singapore publication (March 16, 2013 issue).

I summarized some of the key highlights (my thoughts are in brackets):-

1) The Group is in serious discussions with several major residential developers in China and Myanmar to build attractions in their large-scale residential developments. (This is something new and potentially may form a new revenue and growth driver for the Company, assuming it pans out).

2) More growth should come from megamalls in Indonesia. Revenue from Indonesia rose >20% to $10.7 million.

3) Kingsmen plans to build a foothold in alternative marketing, tapping new technologies and media to help its clients promote their brands both offline and online. (Kingsmen provides marketing consultancy to their clients too, and this division has seen significant growth yoy, up +41.5% to $12.6 million. The sad thing is, though, that this division commands very poor margins).

4) The Research and Design division provides the back-end support for all the Group's projects, as Kingsmen understands how the design is to be translated from drawings into the physical look and feel. While revenue contribution was just $10.2 million, the margins are the best.

5) Benedict is not worried for the newbuilding - they have an option to extend it for 6 years, so they are taking their time to find the right location. Soh and Ong are keen to find a place in the same area, according to the article.

Erratum on the article - Article mentions a final dividend of 4c/share for a dividend yield of 5.1%. This is not correct - it should be a final dividend of 2.5c/share for a full-year dividend of 4c/share, translating into a yield of 4.65% according to theclosing price of $0.86 according to their article.

[valuestalker]

One will be able to find the Revenue by Geographical in Kingsmen AR.
Indonesia contributed "mere" 3.7% of total revenue in FY2012.
I believe Indonesia's project margin should be lower than say Singapore.
Hence the even lower contribution to bottom line.

If it is me, i wouldn't want to put more money in KC base on seeing more KC logo in Indonesia (although definitely it is nice "view" for me as well).
No offense, just pointing out the data.

(vested)

[natnavi]

Thanks for the advise valuestalker.

I must admit, I am slightly biased towards ID, and I do believe that ID is growing, and if KC can position itself well, I believer that KC can earn quite a fair bit from ID.

One will be able to find the Revenue by Geographical in Kingsmen AR.
Indonesia contributed "mere" 3.7% of total revenue in FY2012.
I believe Indonesia's project margin should be lower than say Singapore.
Hence the even lower contribution to bottom line.

If it is me, i wouldn't want to put more money in KC base on seeing more KC logo in Indonesia (although definitely it is nice "view" for me as well).
No offense, just pointing out the data.

(vested)

[RBM]

I see that Kingsmen Creatives Independent Director & Audit Committee Member Prabhakaran N. Nair has divested of his entire 150,000 Kingsmen shares. He appears to have done so thru seven sales transactions between 19th December 2012 and 29th January 2013.

Disclosure of these seven sales transactions was made to the SGX yesterday evening, 18th March 2013, i.e. some 7 weeks to 3 months after the date of the sales transactions themselves. I have not seen myself any earlier disclosure in relation to these transactions.

While I do not profess to be an expert on such matters, isn't there an explicit obligation upon Director's of listed companies to disclose to the SGX their share transactions within a matter of days (rather than weeks or months)? And this is for good reason?

There is a point of principle here.

And the by the way ............. Director Prabhakaran N. Nair would have realised greater proceeeds had he hung on a bit longer! But that is very much a "by-the-by".

Vested