KINGSMEN CREATIVES LTD
5MZ.SI
Kingsmen Creatives (KMEN SP) - Prelude To The Rollercoaster
- We upgrade Kingsmen to NEUTRAL with a TP of SGD0.80 (from SGD0.78, 0% upside) as we believe the stock is now fairly valued.
- The current quarter is expected to remain challenging for the company, led by a slowdown in the expansion of high-end retailers and translation losses from CNY and MYR depreciation. However, we think that the worst is over, as the company embarks on new initiatives to improve its revenue stream.
From Chanel to H&M and now restaurants.
- We expect the retail interior segment to remain challenging in 3Q15, following the weakness in 1H15. To alleviate the situation, Kingsmen Creatives (Kingsmen) is reinventing itself to provide interior contracting work for restaurants and eateries on top of its usual mid- to high-end retail clients.
- Some of the F&B interior works the company has embarked on include Ippudo at Mandarin Gallery Singapore, The Handburger, Singapore and a Hard Rock Cafe in Thailand.
- While we like its tenacious attitude in seeking a new client base during difficult times, we note that these projects from restaurants and local brands will also yield lower margins, which would impact its bottomline.
At least, the fun part never ends.
- We believe the exhibition and museum (E&M) segment will continue to soar with a strong pipeline of theme park projects lined up to FY19. We expect E&M revenue to grow 40% YoY in FY15F and 15% YoY in FY16F, led by more biennial tradeshows and exhibitions in the even-year.
Capex and other small acquisitions.
- The company acquired a piece of leasehold land in August, for the construction of its new headquarters. Thus, we increase our total capex forecast to SGD23.5m for this year.
- We also noticed that Kingsmen has been buying out some of its minority interests to consolidate its earnings. We see this as a vote of confidence in the long run.
Upgrade to NEUTRAL with a TP of SGD0.80.
- We trim our forecast by 5-7% for FY15F-17F and roll over our TP to SGD0.80 (from SGD0.78) based on 10x FY16F P/E. We believe the worst is over for Kingsmen as it pursues a new client base.
- Given that its share price has fallen 16% since mid-August, we upgrade our call to NEUTRAL as we believe the market has priced in the weaker earnings for this year.
Juliana Cai
RHB Securities
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http://www.rhbgroub.com/
2015-10-14
RHB Securities
SGX Stock
Analyst Report
0.80
Up
0.78
