Shares & Derivatives
Kingsmen Creatives – Analysis of Purchase Part 3
By Musicwhiz  •  April 18, 2010
[caption id="attachment_2721" align="alignright" width="150" caption="Photo by pshutterbug"]Photo by pshutterbug[/caption] In Part 3, I shall elaborate on the Competitor analysis for Kingsmen, which is a section I devote to understanding the competitive forces present which may affect Kingsmen’s business, and to evaluate the threat of scaling their competitive moat. Simple and brief write-ups will be provided on three of Kingsmen’s competitors. I will then touch on prospects and plans which the Company has in store to grow further, and finally wrap up with my decision for purchasing shares in the Company (weighing pros against cons). Competitive Analysis Pico Far East (“Pico”) is the market leader in the MICE industry and also does fitting out for reputable clients. Essentially, they have been in this business for as long as, if not longer, than Kingsmen Creatives. Pico is Hong-Kong based and listed on the Stock Exchange of Hong Kong, and as mentioned earlier most of its business is centred in Hong Kong and China, though it has a pan-Asian presence in many countries as well. More information can be found on its website. More importantly, I used Pico as a benchmark for comparing Kingsmen as they are the certified market leader. Metrics such as revenue growth, gross and net margins were compared and I also looked at the list of clients which Pico had and some of the events which they were helping to organize. That was when I got surprised – there were overlaps in the event management arena (e.g. for Formula 1 Singapore) for both Pico and Kingsmen, which made me realize a mega-event could be so massive in scale that all players get a slice of the “action”. In terms of financials, Pico had far higher revenues than Kingsmen (I used financials for half-year ended April 30, 2009), but net margins were slightly lower. Revenue was HK$1.05 billion (about S$210 million) for 6 months, thus annualising this would mean revenues of about S$420 million for full-year, about double that of Kingsmen. Gross margin for Pico was 33.7% against Kingsmen’s gross margin of just 26.4%, so it was obvious that Kingsmen had more room to go in managing their COGS (much of this depends on scale). However, Pico’s net margin was just 5.75%, while Kingsmen had a net margin of 5.9% for 9M 2009 and 7.4% for FY 2008. Even though Pico appears to have much higher gross margin, Kingsmen had better expense control and still managed to stay on par with the market leader. This is a comfort of sorts as it shows that Kingsmen did not fall behind Pico on too many aspects. Read more...
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By Musicwhiz
Musicwhiz who is in his 30s is educated in accounting and works in the investment line (but not in a bank, financial institution, brokerage or fund house). He has a have a full-time job and investing is his side-line as well as passion. Musicwhiz is a value investor and his technique is derived from the teachings of Warren Buffett, Benjamin Graham and Phil Fisher. He incorporate all aspects of their investing style, and modify his value investing style to the Singapore market.
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