musicwhiz, i visited your blog and i am amazed at the level of detail you go into to research a company. Amazed and totally agree. Actually investing in company that is very microcap like Kingsmen is not easy. The reason is that i know quite a few catalist level owners and frankly i would be wary of putting too much or long term in their firms. Sometimes ego problem, sometimes just calibre of the person, sometimes family governance issues. It is one thing to grow a firm to being worth 20,40,60,80,100M and quite another to scale it up with processes and people and markets to over 200M and up. The person required is quite different.
Also some are unable to corporatize and view their listco as personal asset. But you are quite different, u bother to attend AGM and question into detail. So for people like you i would argue investing in gem of a microcap is as good if not better (since less complex accts) compared to large cap blue chips!
musicwhiz, i have a question though.. in the entire universe of stocks including microcaps... why would you pick a company like Kingsmen whose profit margins are so low at just 6%? Seems to be very little buffer here?
(10-11-2011, 05:12 PM)greypiggi Wrote: [ -> ]musicwhiz, i have a question though.. in the entire universe of stocks including microcaps... why would you pick a company like Kingsmen whose profit margins are so low at just 6%? Seems to be very little buffer here?
dydx first highlighted this company back in 2009, and I proceeded to do my own detailed due diligence into its business model, operating history and track record.
Suffice to say that the business model requires very little additional capital to scale up, and therefore it generates very high ROE without much leverage. Though the business has low margins and is in a competitive arena, the 35-year track record does speak for something of a moat, and their emphasis on high quality and with a design-led focus made me sit up and take more notice of the Company. It also generates consistently high free cash flows and has a decent dividend yield.
Attached is another report from Kim Eng for reading pleasure.
Feel free to ask me anything else about Kingsmen. I am learning as well!
(10-11-2011, 05:29 PM)Musicwhiz Wrote: [ -> ] (10-11-2011, 05:12 PM)greypiggi Wrote: [ -> ]musicwhiz, i have a question though.. in the entire universe of stocks including microcaps... why would you pick a company like Kingsmen whose profit margins are so low at just 6%? Seems to be very little buffer here?
dydx first highlighted this company back in 2009, and I proceeded to do my own detailed due diligence into its business model, operating history and track record.
Suffice to say that the business model requires very little additional capital to scale up, and therefore it generates very high ROE without much leverage. Though the business has low margins and is in a competitive arena, the 35-year track record does speak for something of a moat, and their emphasis on high quality and with a design-led focus made me sit up and take more notice of the Company. It also generates consistently high free cash flows and has a decent dividend yield.
Attached is another report from Kim Eng for reading pleasure.
Feel free to ask me anything else about Kingsmen. I am learning as well!
Thanks! Not bad at all. Paying out only 40+% of net profit. Little debt. Chart not so good, slight decline over last 2 years?
Only downside is daily trade volume is low? Today 125000, that is only $70K, so if we accumulate say $20-30K... then if got serious problem will fall very dramatically....
Also the 2 bosses who own 23-25% each... .are they family? And probably quite old already? Succession will be an issue if there are 2 families.
(10-11-2011, 05:44 PM)greypiggi Wrote: [ -> ]Thanks! Not bad at all. Paying out only 40+% of net profit. Little debt. Chart not so good, slight decline over last 2 years?
Only downside is daily trade volume is low? Today 125000, that is only $70K, so if we accumulate say $20-30K... then if got serious problem will fall very dramatically....
Also the 2 bosses who own 23-25% each... .are they family? And probably quite old already? Succession will be an issue if there are 2 families.
I am investing in a business and adopt the perspective of a business owner, therefore the charts do not mean anything to me (in fact, I think they resemble cute squiggles). Just curious though - do charts account for the fact that there have been two dividends a year for Kingsmen, and adjusts itself accordingly?
The trading volume also does not concern me as I am just focusing on its business. Of course, if Mr. Market does something silly then it would make me take notice; otherwise I concentrate solely on the business. It would not matter if there was no trading done for an extended period of time.
The two bosses are not related by blood. They actually met up 35 years ago and were in different companies but decided to come together to set up Kingsmen. I believe Ben Soh is about 63 and Simon Ong is close to 60 years old. Their children are not involved in the business.
My suspicion is that they may decide to sell off the Company to an interested buyer if the price seems right to them, and if the valuation accorded is much higher than current levels.
Just based on his last 2 posts, I believe Musicwhiz has become a true expert in Kingsmen.
As long as Kingsmen is able to grow its business volume, revenue and profits, customer base, product offerings, and regional footprint (especially a deeper penetration into PRC), the longer term value of this enterprise should continue to grow, and this should exert a positive impact of Kingsmen's market cap over time.
For such a well-organized and managed mid-size enterprise, over time there should be more and more interested buyers for the entire company. At the right price, the 2 founders and controlling shareholders may just be willing to sell their stakes to a good party!
you really need to know the 2 owners as friends and know more about them. I think Kingsmen is not really attractive unless it is to a strategic buyer. Most PE funds will want to enter more sexy high margin, high growth space for a flip. Kingsmen is neither. Another reason to buy will be to restructure it, but since it is already efficient and well run, this reason disappears too.
Final possibility is Strategic buyer which is possible but they will also have the same limited margins and valuation. I actually think Kingsmen is fairly valued at 6-8 PE ttm range and is a dividend play. But with 2 families, the added factor affecting dividend is that it will last so long as no in-fighting. Also, be aware that this kind of companyl, the value is in the 2 founders who keep it running well. Valuation drops when they depart. This is not what business types call a sustainable core advantage. Business side, exhibitions and interiors are not quite core industry...so will be affected badly in downturn.
Musicwhiz, actually why not look at QAF? Even more food defensible stock which has earning turnaround story. One solid strong indonesian shareholder and is 3 times size of Kingsmen and also giving 6+% dividend. Moreover, visiting bread factory will be fun as shareholder! Last of all, business is food which is sort of recession proof. I have no shares in both stocks but will enter QAF if it falls to 40 cents... wait long long.
(11-11-2011, 11:27 AM)greypiggi Wrote: [ -> ]Also, be aware that this kind of companyl, the value is in the 2 founders who keep it running well. Valuation drops when they depart. This is not what business types call a sustainable core advantage. Business side, exhibitions and interiors are not quite core industry...so will be affected badly in downturn.
Musicwhiz, actually why not look at QAF? Even more food defensible stock which has earning turnaround story. One solid strong indonesian shareholder and is 3 times size of Kingsmen and also giving 6+% dividend. Moreover, visiting bread factory will be fun as shareholder! Last of all, business is food which is sort of recession proof. I have no shares in both stocks but will enter QAF if it falls to 40 cents... wait long long.
The two founders have put in place processes and procedures to ensure the Company can continue to achieve a high level of performance and customer satisfaction even if they are not running it. That said, I do agree there will probably be some disruptions if the two founders leave, but I am confident succession planning will be part of their plans should that be in the pipeline.
You'd be surprised how resiient the MICE business can be, even during a downturn. Singapore is shaping up to be a regional destination for MICE, and there are also many events being hosted in China and HK as well. Added to that, there will also be more theme park investments in SEA in the coming years as more tourists flock to this part of the world (due to, in part, the troubles in Europe and the downturn in USA). Interiors Division is benefitting from an influx of foreign brands who are keen to set up shop in SG, China Taiwan and HK because there are more here who are willing to spend on luxury, and much of the wealth is shifting to countries like China and India. Kingsmen can help with roll-out management programs for such brands like H&M and A&F should they require to open more outlets in the region. Already, Japanese brand Uniqlo has stated that they want to open as many as 30 stores in the next 3-5 years.
QAF should be interesting, I agree; but I followed FF Wong from QAF to Boustead and that's where I am vested right now, LOL!
Expanded Jalan Besar Stadium ready in January
04:45 AM Nov 11, 2011
SINGAPORE - The expansion of the Jalan Besar Stadium from the current 6,000 to 8,000 seats will be completed in January, just in time for the kick-off of the 2012 Malaysian Super League.
The Football Association of Singapore (FAS) announced yesterday that the contract to add 2,000 more seats behind the goal-line, along King George's Avenue, has been awarded to Kingsmen Exhibits.
Under the terms of the deal, the company will also install two corporate VIP boxes at the grandstand section of the stadium.
Singapore left the Malaysian League and Malaysia Cup after winning both competitions in 1994. During the Malaysia Cup days, the home team often played to capacity crowds at the 50,000 National Stadium, which has been demolished to make way for the upcoming Sports Hub.
With the Hub scheduled to be completed in 2014, and Singapore's return to the M-League after 17 years expected to draw big crowds, FAS president Zainudin Nordin said the expansion of the Jalan Besar Stadium will mean more football fans on matchdays.
He revealed more details of the Singapore Lions team that will play across the Causeway and plans to improve the S-League will be released soon.
Said Zainudin: "I am pleased to note that we are now in the final phase of preparations for the start of the M-League and S-League football season (next year), and more details pertaining to other key initiatives and programmes will be announced shortly."
Attached please find a report on Kingsmen from a third brokerage - DMG. The analyst may be a little over-optimistic and pegged a 9x PER while larger players like Pico FE are trading at 8x. Assuming a PER of 8x instead of 9x, the Company should be priced at a more reasonable level of about 67.6 cents/share, assuming its business continues to grow at the current rate.
(14-11-2011, 10:10 AM)Musicwhiz Wrote: [ -> ]Attached please find a report on Kingsmen from a third brokerage - DMG. The analyst may be a little over-optimistic and pegged a 9x PER while larger players like Pico FE are trading at 8x. Assuming a PER of 8x instead of 9x, the Company should be priced at a more reasonable level of about 67.6 cents/share, assuming its business continues to grow at the current rate.
If Kingsmen is able to expand its design teams, it should be able to grow its revenue. The expected revenue for FY11 should be around 240-250 million. It has been around this figure for the last two years and that is probably why the stock price remains stagnant.
The ROE is dropping since 2008 due to stagnant revenue and increasing equity. Although, at 26% for FY10, it is still quite impressive.
Kim Eng report..
http://kingsmen.listedcompany.com/misc/K...101111.pdf