Judging by the order book size, I think they should recover within the next 6 months provided the contracts won are of similar margins to previous year. Was very surprised to view their 1Q result in the evening as I hadn't expect such a big drop in revenue in a short space of time. Is there any precedence before ?
(07-05-2011, 01:05 AM)Nick Wrote: [ -> ]Judging by the order book size, I think they should recover within the next 6 months provided the contracts won are of similar margins to previous year. Was very surprised to view their 1Q result in the evening as I hadn't expect such a big drop in revenue in a short space of time. Is there any precedence before ?
Hi Nick,
If you read the MD&A carefully there was apparently a timing issue with the recognition of revenues, as the Shanghai Expo tail-end revenue recognition fell within 1Q 2010, and so did Variation Orders at USS. This accounted for $15 million of revenues for 1Q 2010. The difference in revenues for 1Q 2011 and 1Q 2010 stands at $15.3 million, so it can almost be 100% attibutable to these two large one-off projects alone. If we conservatively assume that Kingsmen starts to work off its current order book, and also bids and wins some parcels of work for upcoming theme parks in China and other SEA countries, revenue may still outstrip that of FY 2010 by the end of FY 2011.
There was a precedence in terms of profit drop in 3Q 2010. In that Q, even though revenue was up 7.6%, net profit was down 17% due to higher staff salaries and the same item "other expenses".
The business of Kingsmen mirrors Boustead in a way, as Boustead also has "lumpy" revenue recognition and depends on order book, so comparing either 6M or 12M (preferred) results is more telling.
If we are merely looking at one quarter's results and forgot about Kingsmen's long, solid track record in growing the business and its profits, as well as the company's current strategic development into a regional enterprise in the next 5 to 10 years, we are clearly missing the core!
I wasn't pleased to see the latest set of result. The last quarter result gave me the impression that this company able to fill up the vacuum left behind by the Universal studio and Shanghai expo project, but i was proven wrong by this latest result.
Over the weekend i thought through this company:
1. The revenue stream - To sustain the last year level, it really need a continue boom in theme park and MICE in asia. Who knows this asia boom can last for how long. The latest secured 36m in museum and exhibition not enough to fill the 105m vacuum left behind last year.
Their business also seem to be 1 off, always need to continue scramble for new projects to fill the vacuum.
2. The thin margin - The net margin has always been quite low. When revenue dropped 22%, the net profit dropped 42%, the fixed cost seems high in this industry. And the company doesn't seem to able to translate their quality of works into money term.
3. How recession proof - Well when a recession hits most company will first cut their marketing and advertising budget. It won't be good for a company that works in retail renovation, exhibition and theme park business. Last recession asia able to recover fast, but looks at US, i doubt the Las Vegas or the luxury retails are doing well, and want to expand.
Not sure these are valid concerns, just something that come to my mind.
(09-05-2011, 05:12 PM)Nick Wrote: [ -> ]http://www.remisiers.org/cms_images/King...09-OIR.pdf - a bearish report from OCBC
Just one quarter of lower revenue and profit, and this 'smart' analyst decided to mark down his own Fair Value estimate by 20% - from $0.72, to $0.575! And this is happening despite Kingsmen reporting a higher latest order backlog of $154.0m. I guess his boss should review his work and give him extra coaching!
for kingsmen creative, revenue is most from order book. lower revenue from Q1, is probably due to timing of revenue recognition. from the order book for the current financial year, so far Kingsmen can still at least match last year's performance.
One quarter itself is not representative of the whole year and years to come. We have to look at the long-term and not at the short-term.
(09-05-2011, 06:54 PM)dydx Wrote: [ -> ]Just one quarter of lower revenue and profit, and this 'smart' analyst decided to mark down his own Fair Value estimate by 20% - from $0.72, to $0.575! And this is happening despite Kingsmen reporting a higher latest order backlog of $154.0m. I guess his boss should review his work and give him extra coaching!
Maybe this analyst had to meet targets? They're recognized for hitting price targets no? And it's easier to go to $0.575 than $0.72 from $0.56 no?