Kingsmen Creatives

[kennynah]

I base my investment decision on a lot of intangibles (i.e. more than the numbers and net margins).

means you agar agar lah....right? hahaha

[qxing78]

Generally, I dun like this kind of business, as they can be quite unpredictable.
But maybe you can look at Cityneon 's performance (another SGX listed company).
Cityneon is the competitor of Kingsman.
Cityneon is majority owned by Malaysia- Star Publication, ie. their SPH.

[Aspellian]

There are companies with "intangibles" that can keep on growing because of reputational assets, branding etc.

One thing positive going for such "advertising-related" companies is that its getting more and more difficult to get the attention of consumers. Consumers always like something "new and exciting".

You walk along Orchard Road, there are so many shopping malls. which shopping malls have the best attractions/billboards/displays etc may have a higher chance of attracting eyeballs and thus walk-ins.

So too for exhibitions whereby each are trying to create a "wow" feeling so that people will come back for more, companies willing to rent the booths and advertisers willing to throw in the $$$.

maybe a key risk is individual talents - but maybe for Kingsmen's industry not as drastic as Investment bankings or corporate finance whereby one person who leaves can "destroy" years of goodwill and bring major clients away.

Above all very agar-agar, kueh lapis cos didnt bother to chew the annual reports or announcements.

[kennynah]

You walk along Orchard Road, there are so many shopping malls. which shopping malls have the best attractions/billboards/displays etc may have a higher chance of attracting eyeballs and thus walk-ins.

you sure the billboards and window displays pull you in to the shopping centre? choon bo? sure not skirts lure you into the shops? hahaha...

[Aspellian]

You walk along Orchard Road, there are so many shopping malls. which shopping malls have the best attractions/billboards/displays etc may have a higher chance of attracting eyeballs and thus walk-ins.

you sure the billboards and window displays pull you in to the shopping centre? choon bo? sure not skirts lure you into the shops? hahaha...

i tot knowadays they got put "LIVE Manequins" living in tanks as displays right? - competition tough lei! (eyes very busy, respiratory system overwork - drooling )

[kennynah]

i say.....where you find these "live" mannequins? singapore?

[Aspellian]

I saw once along CitiLink walkway going to Marina Square (think near New York New York). promoting canon or samsung products... very innovative. so the models just sit inside, chit-chat, take photos of each other, surf web, all using the brand-name products.

[kennynah]

whole new meaning to fish tank...hahhahaha

[Musicwhiz]

Oh well, I would argue that almost all businesses are subject to the same uncertainty about the future. What differentiates one company from another is the reputation and Management quality + track record. Granted margins are low but if there is recurrent free cash flows and low working capital requirements (plus the business is easy to scale up to other territories), then it still may make a good investment.

I admit I am still learning as I go along - on what makes a good business to own long-term. I very well might be wrong on this one, so am keeping my eyes and ears peeled over the next few years in order to learn more.

Thanks guys!

[Musicwhiz]

I spent most of last night and this morning thinking about KC's business model, capital requirements, scalability and scope of work + clientele and customer base. Maybe I can articulate some thoughts here, but please correct me if I am wrong on anything:-

1) KC's business requires little capital and almost no debt (except minor ST debt) to function effectively, as theirs is a service business. Granted margins are low in this industry, but this is balanced out by the relatively small working capital requirements of the business.

2) The business can generate healthy recurring FCF consistently and the ability to scale up to other territories at minimal additional cost is one of the strengths of the business model. Staffing costs and expertise are one of the main expenses of this business, and more hiring needs to occur if KC expands their project/contract portfolio. One must then look at the incremental additional cost versus the incremental additional revenues to see if the scaling works, and if economies of scale kick in to lower costs in relation to revenues.

3) Contrasting KC's business with a high-margin but debt-laden business, I would still think a more superior business model is one which has high ROE and good FCF but requires little gearing. Many other businesses have high net margin and also high ROE but the high ROE is due to leverage. While leverage in itself is not bad, there are interest (financing) costs involved and it shows the company may need consistent capex just to grow or maintain their revenue base.

4) Opportunities in SEA region have broadened and though one may wonder if KC can continue to have the same breadth of projects once the IRs are completed, one must remember that Singapore is different from what it was back in 2004 when KC was listed. There is more platform now for MICE events, and more and more high-end retailers are setting up shop here and require fitting out. In other words, the pie is growing for ALL players (whether Design Studio, Cityneon or Pico Far East) and everyone can have a share in the growth. That is to say, even if KC maintains their market share, the growing pie will ensure revenues can increase as well. As long as they keep costs lean, they will be able to grow earnings correspondingly.

5) KC's competencies are in design and IMC and adding value to clients. So people hand them a contract based on their track record and also because they provide a value-enhancing service. This is an intangible which not all similar firms can provide, unless you have reputation and experience. The experience of 34 years alone and numerous high profile clients, as well as KC's focus on quality, has generated many repeat customers and may also attract new customers in future.

Will pen down more thoughts if I have them. Thanks!