Kingsmen Creatives

Kim Eng on 6 Nov 2012

In line with expectations. 3Q12 results w were in line with expectations. Revenue was SGD70.4m (-18% YoY) cou upled with softer earnings of SGD3.6m (-19% YoY). This makes up 662.8% of our 9M12 earnings estimates. We are expecting the bulk of th he earnings to be recognised in the fourth quarter, as was the case wwith FY11’s 4Q results that accounted for 36% of the FY11 resul lts. We are positive about Kingsmen’s strong orderbook of SGD28 89m, on the back of strong consumer optimism in Asia. We roll forw ward our valuations to FY13 estimates, based on a blended valuation o of 9.7x FY13F earnings, and
derive a new TP of SGD0.96 from SGD0.855. Maintain BUY.

Lower recognition from Interiors divisioon. Earnings of the interiors division declined by 30.4% YoY to SGD3 31.9m in 3Q12, due to lower recognition of projects than in 3Q11. Non n-core segments recorded a  healthy YoY earnings growth rate of 25% % to reach SGD5.8m. Gross margin increased by 2ppt to 21.5% in 3Q1 2, while net margin stayed at 5.1%, lower by 0.1ppt YoY.

Strong orderbook of SGD289m. Kingsm men has a solid orderbook of SGD289m (+25.2% QoQ): SGD274m wwill be recognised this year. Kingsmen successfully delivered works fo or the London Olympics and F1 Singapore in 3Q12.

Expect stronger results from E&M and I Interiors. In the final quarter, we are expecting higher sales recognition n from the interiors division, where fit-outs are needed before the festiv ve season. Museum projects such as Gardens by the Bay, the Guan ngZhou HengDa Exhibitions Centre, and the Hong Kong Maritime Muse eum will also be delivered by the end of the year.

Roll over to FY13, raise TP to SGD0.996. We are maintaining our forecasts and rolling forward our target pr rice to FY13F estimates. We will be monitoring contract wins for amu usement parks as a strong earnings booster for the year going forw ward. Kingsmen declared an interim dividend of 1.50cts last quarter an nd we are expecting another 2.05cts to be paid out in the next quart ter, thus implying an overall dividend payout ratio of 45% and a dividendd yield of 5.3%.