Kingsmen Creatives

[Nick]

I prefer hardcopy as it is easier to read and portable. I don't see the point in CDs - I could easily download it from SGX.

[natnavi]

They sent it to ur overseas address within a week??? Do u live in Asia or further away? Excellent IR indeed!

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natnavi, this simple episode shows that Kingsmen cares about its shareholders, even though we may be minority shareholders.

This is definitely a great testament that they do care about us.

I am currently living in Europe so it is really amazing how quickly the book got to me.

[Thriftville]

Hey buddies, anyone has idea how many percent of Kingsmen's earning is likely to be recurring?

the current order book is about $80m for 2011, which is expected to be completed in 1 year.
After that, is there good chance that the revenue from park & exhibition be rather consistent for the next 5 years?

[Musicwhiz]

Hey buddies, anyone has idea how many percent of Kingsmen's earning is likely to be recurring?

the current order book is about $80m for 2011, which is expected to be completed in 1 year.
After that, is there good chance that the revenue from park & exhibition be rather consistent for the next 5 years?

My view is that income cannot be classified as "recurring" per se. Since 70% of Kingsmen customers are repeat customers for Interiors, I guess you can use that % and multiply by their Interiors revenue for FY 2010 to get a rough figure.

Variation orders (VO) may also constitute recurring revenue to a certain extent as theme parks require refurbishment on an ongoing basis (say 2-3 years). The value of these VO is not known at this point in time, but is likely to grow as Kingsmen snare more theme park projects over time.

Another area I can think of is Fixtures Export. There is consistent high demand for this (according to the GM who I spoke to at the AGM), and for FY 2010 revenues for this hit $20M. I expect this to go up in time too.

Hope this helps!

By the way, Kingsmen will be releasing their 1Q FY 2011 results some time next week (week of May 9, 2011). I'd expect the order book to be higher than $80 million as they had alluded to that during the AGM. But results are expected to be flat or down as 1Q is traditionally the slowest for Kingsmen.

[Thriftville]

Thank you very much Musicwhiz for the info!
I think I've read from Genting's report that they're going to spend millions every year to renovate the parks. So its good news to Kingsmen!

From the list of customers from interior design, there are luxury brands like Fendi, Tiffany, etc.
Any idea if Kingsmen is able to secure contracts for companies like LV, Channel, Rolex, etc? who are their competitors in this luxury segment?

For interior design, how often do they change the store's design?

[Musicwhiz]

Any idea if Kingsmen is able to secure contracts for companies like LV, Channel, Rolex, etc? who are their competitors in this luxury segment?

For interior design, how often do they change the store's design?

Hi there,

Kingsmen is actively courting new customers as well as servicing existing ones. GM did mention they managed to get new customers but did not give details, nor names. When I was taken on a tour of the premises at Kingsmen, I saw one of their new customers - Nespresso (coffee-machine makers).

As for competitors, in the luxury segment there are very few as contractors cater to mid-market to lower-end customers, who require a once-off fit-out. The strength here for Kingsmen is the roll-out Management programme which they can undertake for large, reputable clients. I dón't know of any other company which can do simultaneous roll out for a customer in different countries.

Store designs would require a breath of fresh air probably at least once in 2 years, I suspect. Also, if the mall management wants to revamp the mall itself, many stores may also consider renovating to keep up with the overall "image" of the revamp. As an indication, GM mentioned that for malls in Malaysia, they will have refurbishment once every 2-3 years.

[dydx]

Those who wish to have a better idea on Kingsmen's design capabilities and quality of work, should pay a visit to the new super-deluxe "Malmaison by The Hour Glass" store located at the new Knightbridge on Orchard Road. It is more than a store - the interior has been fitted out to look more like the inside of a beautiful castle!

[Thriftville]

Grandwork is a competitor in luxury segment. They've built miu miu stores in Paragon.
http://www.grandwork.com.sg/projects.htm#retail

[Musicwhiz]

Grandwork is a competitor in luxury segment. They've built miu miu stores in Paragon.
http://www.grandwork.com.sg/projects.htm#retail

Hi and thanks for the research!

It looks like they have also done a lot of F&B outlets, which Kingsmen only does "selectively". Perhaps that is Grand Work's market segment? Noted that they also had about 10-12 projects for luxury segment, but unsure if they do roll-out management projects as well.

Also, quite curious as to why they only show projects up till 2009. How about 2010 and 2011 projects?

[Musicwhiz]

Kingsmen released their 1Q 2011 results yesterday May 6, 2011, and it was somewhat disappointing.

Revenues fell 22% while gross profit dropped 11%, and the positive aspect was the rise in gross margins from 26.4% to 29.9%, possibly as a result of smaller parcels of work which command higher gross margins; as well as the strength of Export Fixtures which also yields better margins.

The main culprits affecting net profit were staff costs (down just -2.1%) and "other expenses" which actually increased 10% despite the drop in gross profit. I understand from the AGM that Kingsmen were hiring more designers in SEA in order to prepare for theme park projects and also to boost their Interiors segment in China and North Asia; so I guess this is one expense which is hard to keep low. Even the GM Andrew Cheng grudgingly admitted that staff costs were an aspect of expenses which was tipped to rise.

As for "other expenses", I have to clarify with him on what this constitutes, and why it has not dropped in tandem with revenues.

The result was a drop in net profit by 42%, and net margin was only in the 3-4% region. Since 1Q is traditionally Kingsmen's weakest, it would not be fair to say that it represents the entire financial year.

Balance Sheet remains strong with current ratio at 1.60, and cash has increased to $30.8 million against a reduced debt level of $4.9 million (versus $5.3 million a year ago). Cash from Operating activities was a +ve $1.8 million and capex was $365K, so there was +ve FCF.

Division wise, M&E saw a drop in revenue as 1Q 2010 recognized some additional projects which were not present in 1Q 2011. Interiors was the shining star with revenues increasing further by 18.7%. It stands to reason that if staff costs can be kept in line as a result of this advance hiring, then if M&E secures more theme park projects in the next few months; and Interiors continues to do well, there would be an improvement in the net margin and net profit levels in 6M and 9M 2011 results. Since cash flow continues to be strong, I'd also expect Kingsmen to at least maintain their interim dividend of 1.5 cents/share.

The order book as at May 5, 2011 now stands at $154 million, of which $138 million is expected to be recognized in FY 2011. Compared to last year, contracts secured was only $133 million, so the order book has increased by $21 million. I believe this quarter's poor result is also due to the timing difference in revenue recognition, hence we have to look at 6M and then 12M performance to see how things pan out.