Goodbye Kingsmen Creatives

Kingsmen Creatives makes up 3% of my stock portfolio. I have divested all my holdings of Kingsmen Creatives at a loss. As you can see below, even though revenue improved by 1.4% to S$365.9m in FY2019, gross profit fell 5.8% and net profit fell 93.6%. Gross Profit is revenue minus the cost of goods sold. Net Profit is the revenue after deducting all the operating, interest and tax expenses. As we can see, majority of the profit was wiped off by the increase in expenses.

Here are the expenses incurred by Kingsmen Creatives.

  • Higher depreciation charge on property, plant and equipment due to depreciation charge incurred on the new headquarter building.
  • Increase in employee benefit expenses from new experimental attractions business.
  • Foreign exchange losses.
  • Higher amount of loans and borrowings outstanding in FY2019 compared to FY2018.
FY2019 FY2018 Change
Revenue S$365.9m S$360.9m 1.4%
Gross Profit S$77.2m S$82.0m (5.8%)
Net Profit S$0.5m S$8.1m (93.6%)
EPS 0.26 cents 4.09 cents (93.6%)

Moving ahead, even though Kingsmen has secured contracts worth of S$140 million, what triggers me to sell off Kingsmen was that no dividend was declared. It was mentioned that the company wishes to retain cash for its operations.

The sudden COVID-19 outbreak heightened risk alerts that have significantly limited travel and human interaction and this led to a decline in business activities. Exhibition, events and experimental attractions have been impacted and some projects have been rescheduled to the later part of the year.

Goodbye Kingsmen Creatives.

Kingsmen Creatives 3Q2019 Net Profit Tumbled 93%

Nowadays, when I thought of Kingsmen Creatives, they remind me of NERF. This is because the NERF Action Xperience (“NAX”) Arena is open at Marina Square on 4th October 2019. Spanning over 18,000 square feet in Marina Square, the world’s first NAX arena is an edutainment-inspired Family Entertainment Centre designed to encourage active play and teamwork.

Now, back to Kingmens Creatives 3Q2019 financial results. I thought my eyes was playing a trick on me. Revenue fell slightly by 1.2% to S$90.85 million. However, net profit fell by a whooping 93% to S$115,000.

3Q2019 Financial Results

3Q2019

(S$’000)

3Q2018

(S$’000)

Change
Revenue 90,847 91,975 (1.2)%
Gross profit 19,304 18,740 3.0%
Net profit 115 1,632 (92.95)%
Earnings Per Share (EPS) (cents) 0.06 0.82 (92.68)%

Kingsmen Creatives is made up of four business divisions. They are the Exhibitions and Thematic division, Retail & Corporate Interiors division, Research & Design division and Alternative Marketing division. Below is a brief summary of revenue from each division.

  • The Exhibitions & Thematic division registered a revenue of S$124.9 million in 9M 2019, an increase of S$21.5 million or 20.8% from S$103.4 million in 9M 2018.
  • The Retail & Corporate Interiors division recorded a revenue of S$122.8 million in 9M 2019, an increase of S$4.9 million or 4.1% compared to S$117.9 million in 9M 2018.
  • The Research & Design division achieved a revenue of S$12.0 million in 9M 2019, an increase of S$1.6 million or 15.3% from S$10.4 million in 9M 2018.
  • The Research & Design division achieved a revenue of S$12.0 million in 9M 2019, an increase of S$1.6 million or 15.3% from S$10.4 million in 9M 2018.

As of today, the share price has fell to S$0.46. Based on the historical dividend payout of S$0.025 cents and current share price of S$0.46, the current dividend yield is 5.43%. But of course, it is unknown if Kingsmen Creatives will continue to maintain its dividend payout.

With NAX just opening last month, I guess it will take some time to judge if the venture into NAX will take off. I foresee further pressure on the current stock price of Kingsmen Creatives. The current dividend yield of 5.43% sounds attractive for a small cap stock but the risk here is Kingsmen Creatives venture into Intellectual Property business such as NAX which can eat into its capital if the business venture doesn’t take off.

Kingsmen Creatives currently makes up 3% of my stock portfolio. We shall see if value can be unlocked in the future.

Kingsmen Creatives Maintain Interim Dividend of 1 Cents for 1H 2019

On 8th August 2019, Kingsmen Creatives Ltd has released their 1H2019 financial results. Even though Kingsmen Creatives have reported an increase of 17.7% in revenue to S$172.8m, net profit fell a whopping 39.9%. Earnings per share fell 40.5% to 0.88 cents.

The increase in revenue was mainly due to the contribution from several key events and projects in 1H 2019. However, the profit was eroded by higher operating expenses and employee benefit expenses incurred due to higher cost resulting from increased headcount from the new experiential attractions business and increased average wage. If you have followed Kingsmen Creatives closely, you would have known that they have invested in NERF and the world’s first NERF Action Xperience centre is opening in Singapore in the fourth quarter of 2019 at Marina Square.

The cash flow is still healthy as Kingmen Creatives cash and cash equivalents stood at S$67.7 million as at 30 June 2019 and I certainly hope they keep it that way.

1H2019 Financial Results

1H 2019 1H 2018 Change
Revenue S$172.8m S$146.8m 17.7%
Gross profit S$38.8m S$35.7m 8.6%
Net profit S$1.8m S$3.0m (39.9)%
Earnings Per Share (EPS) 0.88 cents 1.48 cents (40.5)%

Kingsmen Creatives is made up of four business divisions. They are the Exhibitions and Thematic division, Retail & Corporate Interiors division, Research & Design division and Alternative Marketing division. Below is a brief summary of revenue from each division.

  • The Exhibitions and Thematic division registered a revenue of S$83.2 million in 1H 2019, an increase of S$18.1 million or 27.8% from S$65.1 million in 1H 2018.
  • The Retail & Corporate Interiors division recorded a revenue of S$79.3 million in 1H 2019, an increase of S$9.4 million or 13.4% compared to S$69.9 million in 1H 2018.
  • The Research & Design division achieved a revenue of S$8.1 million in 1H 2019, an increase of S$0.8 million or 10.8% from S$7.3 million in 1H 2018.
  • The Alternative Marketing division registered a revenue of S$2.3 million in 1H 2019, a decrease of S$2.2 million or 49.0% compared to S$4.5 million in 1H 2018.

My personal opinion is that it is still early to tell if Kingsmen Creatives investment into NERF will take off. From the current closing share price of S$0.51, we can tell that investors are still not confident about the NERF investment.

Last but not least, I am glad that Kingsmen Creatives did not cut its dividend. An interim dividend of 1.0 cents was declared which was the same as last year. Based on the historical dividend payout of S$0.025 cents and current share price of S$0.51, the current dividend yield is 4.90%.