(BUY, S$0.56, TP S$0.76)
Kingsmen achieved revenue of S$57.1m (-11.6% YoY) and PATMI of S$4.5m (-2.8% YoY) in
2Q11. The decline was largely attributed to the absence of major projects (in 2Q10, there were some billings from the Shanghai World Expo and Universal Studios). This has however, led to gross margins improving to 29.5% (2Q10: 27.6%), as margins from work done for the
events/shows were generally lower. Outlook remains healthy despite the global economic
uncertainty as (1) large retail players are still coming to Asia and (2) the theme parks planned for the Asian region are progressing on track. We reiterate our BUY call with a TP of S$0.76, pegged to 9x FY11F earnings.
Orderbook remains healthy. Kingsmen’s orderbook as at Aug 11 stands at S$197m, of which
S$178m will be recorded in FY11. This includes contracts for Gardens By the Bay, theme parks
in the region and interior fit out works for global retail brands setting up shop in Asia. Given its capabilities in thematic and scenic construction, management is optimistic that they would be able to secure some contracts from the number of planned theme parks in the region (especially in China and Korea), which would contribute to growth in its Exhibitions and Museum division.
Maintains good dividend payout. Kingsmen declared dividends of 1.5 S¢ / share for 2Q11.
Assuming management distributes 2.0 S¢ / share in 4Q11, this would translate into a dividend
yield of 6.3%. We think Kingsmen would be able to maintain its dividend payout ratio of ~40%.
Valuation remains attractive. Kingsmen has a strong balance sheet with net cash position of
S$23.1m. At present levels, it is trading at 6.8x FY11 P/E, which is attractive compared to its peers which are trading at an average of 8.3x. Maintain BUY for a company with stable
dividends.
No comments:
Post a Comment