05-03-2012, 10:34 AM
(02-03-2012, 11:14 PM)RBM Wrote: It seems to me that the Kim Eng Analyst did not take into account the benefit to Kingsmen of recently securing the S$ 18 Million Universal Studios business announced a week or so before the FY 2011 results - I did not see it listed on the second page of the report. If I am correct (on rare occasions this happens) then this would make the outlook picture look even more rosy.
Hi RBM (and dydx),
My view is that this analyst report is not very well-written, and therefore we should not place too much emphasis on it. I've noted the following observations:-
1) Factual error in terms of reporting on dividend. She mentioned final and special dividend of 2.5c/share whereas for FY 2011, it was just a final dividend (FY 2010 saw a final of 2c/share and special of 0.5 cents/share).
2) FY 2012 projected dividend was stated as 4.1 cents/share. This is a very unusual number as Kingsmen has (historically) paid out dividends in multiples of 0.5 cents/share. She could simply have projected 4 cents or 4.5 cents.
3) Why use a high multiple of 9.4x earnings to value Kingsmen? Even Kingsmen's much larger competitor Pico FE is trading around 8+x PER, so Kingsmen should technically be given a "discount" to the market leader. She could value the different divisions differently as well, but 9.4x seems a tad over-optimistic for a one-year target.
My own personal ultra-conservative projection is a target price of 70 cents after 2 years (i.e. end-2014). This is assuming dividend per year remains at 4 cents/share for the next 2-3 years.
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/