Published June 30, 2009

Kingsmen enjoying business sweet spot

By VEN SREENIVASAN

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IN AN environment where credit is hard to come by and markets are under siege, there are few companies which can claim to be still enjoying a business sweet spot. Communications design group Kingsmen Creative appears to be an exception. This mainboard-listed company which specialises in design and fitouts for high-end boutiques, theme parks, exhibitions, conventions and museums, continues to power ahead, recording impressive sequential earnings growth.

Its earnings for FY2008 jumped 51 per cent to a record $14.2 million, from $9.37 million the previous year. Kingsmen is already on record assuring investors that FY2009 would be another record year.

Driven by strong contribution from its Greater China subsidiaries, which it acquired in September 2007, the company's topline revenue grew 31 per cent to $190.55 million at end-December 2008, from $145.91 million a year earlier.

Kingsmen also had almost $28 million cash in the bank coming into this year. It currently sits on new orders of some $170 million, some 40 per cent more than a year ago.

But even as this commentary is being written, the company's orderbook is steadily getting thicker amid a steady flow of new projects, both in Singapore and overseas.

The company - which provides regular updates on its orderbook - has already clinched dozens of high-end interior fitout projects at the new Orchard belt malls like the ION, Somerset 313 and Orchard Central. These jobs could potentially boost its orderbook by more than $30 million by the year-end.

And away from the prime shopping belt, it is poised to take on numerous projects at the huge retail malls at the two integrated resorts. It also has numerous jobs at various other upgraded malls.

Its exhibitions unit is already busy with $80 million worth of projects at Universal Studios to design, build and install the theme park's various facades. With the pipeline of projects still flowing, this could surpass $100 million by year-end.

Meanwhile, Kingsmen is into its second year of its $25 million five-year Formula One contract for hospitality suites and seating. Next year will be another busy one with its numerous contracts for the 2010 Youth Olympics.

But that is just Singapore.

Kingsmen's ex-Singapore business has been growing even faster than its domestic income, and currently already accounts for 60 per cent of revenue.

In Greater China, where it enjoys net margins of almost 10 per cent (compared to 8 per cent in Singapore), Kingsmen continues to execute the aggressive retail store rollouts for leading brands like Apple Computers, Burberry's, Ralph Lauren, Hyundai and others. The region already accounts for a quarter of Kingsmen's revenue, but given its high growth and fatter margins, should soon overtake Singapore, which currently accounts for about 40 per cent.

One of its single biggest projects in China could be the World Expo 2010 in Shanghai in May 2010. This is a six-month biennial expo where virtually every country (including Singapore) and every major global brand will be present. And exhibitors spend tens of millions of dollars to build and fit out their pavilions. It doesn't take a genius to figure out that Kingsmen - which has a good foothold in Shanghai and Beijing - is already pitching for projects.

In fact, Kingsmen's key exhibitions, conventions & museums division has seen revenue surge of some 80 per cent over the past year, thanks to events like the Singapore Airshow, Singapore F1, airshows in Dubai and South Korea, the opening of Venetian Macau, Tax-Free Asia Pacific, and various motor shows across Asia. And order flow visibility remains strong, despite the economic slowdown.

New projects include the regional rollout of Universal Studios theme parks in Dubai, Beijing and South Korea and the Shanghai Disneyland. Each project is worth about US$1 billion, with players like Kingsmen typically clinching about 5-10 per cent of contract value.

With a repeat customer rate of over 70 per cent, a presence in over two dozen countries, gross margin widening to 30 per cent and net margin at over 8 per cent, it is perhaps not surprising that some analysts have dubbed Kingsmen the 'recession-proof' business.

Indeed, this is a company which appears to be enjoying a prolonged business sweet spot.