Kingsmen Creatives

Kim Eng on 11 May 2012

Strong 1Q results. Kingsmen Creatives kickstarts FY12 with a strong set of first quarter results. The group achieved sales of SGD46.9m, up 29.9% YoY, and net profit of SGD2.0m, up 50.7% YoY. Workflow was impressive this quarter and the order book looks solid for the coming year. Though illiquid, the group’s steady earnings stream and attractive dividend yield of 6.3% is hard to stay away from.

Exhibition’s back this quarter. The Exhibitions and Museum division performed exceptionally well, rising 73.7% YoY to SGD22m. This is largely attributed to various exhibitions showcased this quarter, from Art Stage, the Singapore Airshow and Asia Pacific Maritime among other exhibitions and events. The Interior division achieved the same numbers at SGD20m, suggesting workflow is still steady with revenue generated from key customers such as Aldo, Burberry and Coach.

Margins lower; not a worry. Gross margins fell 2.6ppts to 27.2% and net margin declined by 3ppts to 4.2%. This is mainly a seasonality issue as the quarter coincides with Chinese New Year, which means higher salary expenses and a salary adjustment period.

Positive MICE industry outlook. We are impressed with the group’s ability to procure projects not only in Singapore but also several in other countries. The group has confirmed SGD167m in contract orders as of May 2012. This includes exhibitions and events, such as Food and Hotel Asia, Tax Free Asia Pacific, BMW event launches and Yeosu Expo 2012. Its existing projects are also progressing well, with projects at Garden by the Bay, Universal Studios, Sotheby’s Visitor Centre in Hong Kong and more.

Maintain BUY, TP at SGD0.85. We have tweaked our earnings estimates down by 1%. Kingsmen’s current ex-cash valuation is at 7.8x FY12F PER. Our target price is unchanged at SGD0.85 on a SOTP valuation, implying 9.4x FY12F PER. Reiterate BUY.