Kingsmen Creatives

[karlmarx]

When compared to CityNeon, KC will certainly be seen to have performed poorly; in terms of both profits and share price. But such comparisons may not be entirely fair to KC, as CN now has a slightly different business model, and concomitant risk profile.

The difference is that CN has moved up the value chain by organising and producing ticketed events, while KC has remained a contractor to the organisers of such events. CN's new business is not without its risk; they can be hurt by poor sales of event tickets. KC, on the other hand, does not take such risks.

Although KC now has the Nerf FEC contract, it still appears to be a slow/measured step up the value chain, and does not appear to signal a major change in management's strategy. Investors should assume that this new foray will not enhance profit significantly.

If KC and CN were in the real estate industry, it would not be too inaccurate to suggest that CN is a developer cum contractor, while KC is just a contractor. The developer -- taking higher risks since it has to first incur development expenses without any certainty of sales -- is rewarded with higher margins.

If CN were to have failed in their endeavour, KC will then by comparison be seen to have been circumspect and conservative in their business conduct. Of course, CN did succeed. But does CN's success mean that KC managed the business poorly?

Considering the challenges that KC's customers are facing, KC -- in contrast to her customers -- didn't do too badly. To be able to remain profitable and pay dividends during difficult industry conditions tells us something about the strength of their business. Compare this to the O&G contractors and asset-owners who were jobless after the oil majors slowed exploration and production expenditure.

Certainly, KC could have done better. But if it is (far) beyond KC's ability to be a 'developer' of events, it may be better for shareholders that KC remain a key player in its niche markets, lest there be losses and distraction from venturing into waters (far) beyond her depth.

In the instance where KC maintains the status quo -- being a key player in its niche market and not moving up the value chain -- it will at best earn modest margins and returns over the long-term. Consequently, its valuation will also be restrained. Even so, can KC be a profitable investment at present prices?