Kingsmen Creatives

 

Kingsmen caught my attention 9 years ago. My first purchase was in December 2006 and I accumulated more. over the next few years. However, I sold out (emotion at play) in December 2012 as share price tumbled due to fraud. I can't quite remember the details but reading through valuebuddies forum, the amount involved was small compared to the business and these were isolated cases.

I re-established a position in the company in mid-2013 and purchased more during the recent selldown. Here is my take of the company.

Business
Kingsmen provides clients with integrated solutions in Exhibitions & Museums, Retail & Office Interiors, Research & Design and Integrated Marketing Communications in the Asia Pacific region. Retail clientele include Christian Dior, Fendi, H&M, Shilla, Tiffany & Co., Uniqlo and others. Having seen their work in the shopping centres, I am impressed by their work. Some of the events that the company are involved in are F1 Sg, Singapore Sports Hub, Singapore Airshow and BNP WTA Finals. 

As seen from the above, Kingsmen has established an impressive list of International clientele base that allows the company to generate recurring revenue and expand together with them.

Crunching the Numbers
The image below shows the key financial figures of the company over the past 10 years. 2015 figure might not be accurate as it is based on the half-yearly results.

As seen from the data, revenue has tripled over the decade but the growth has slowed over the past 5 years. Net profit growth is more lumpy and again for the last 5 years, the numbers do not look as rosy. The low net profit margin of about 5% to 6% shows that the company does not have much pricing power and is probably in a competitive industry. 

Return of Equity has been around 20 plus percentage but has dropped along the years. The company does not have much capital expenditure except on years when they are purchasing land and/or building new factory. This has resulted in a pretty healthy free cash flow over the past 5 years. The company has also been paying out about 40% to 50% of its income for dividend. For the latest half-year report, the company has cut its interim dividend from 1.5 cents to 1.0 cent.

Management
The two founders of the group Benedict Soh and Simon Ong still hold about 50% of the shares. The public face is Benedict who is the executive chairman and has featured in various interviews by the media over the year. While I have not attended any of the AGM or met any of them before, I am pretty confident of the team based on how the company has reported their results. 

My Take
The company has enjoyed a period of good growth from 2006 to 2011 but over the last few years, it seems to struggle to maintain the momentum. I perceive the company is going through a period where it is preparing for the next phase of growth. The Executive Chairman's statement in last year annual report provides a glimpse of their current situation.

2014 was a fruitful year as we made strides in ramping up our production and human resource capabilities in anticipation of increasing demand for our products and services around the world. The acquisition of the Johor property was a strategic step towards establishing a permanent manufacturing base. We continued to upgrade and align the skills and knowledge of our people through the Kingsmen Academy, with training courses tailored to develop well-rounded individuals attuned to our business needs. We also sought to extend our expertise in the design and production of shop fixtures and decorations to the United States with the incorporation of our subsidiary, Kingsmen Projects US, in California in 2014. This is in line with our long-term view of the growth prospects for our business, as we continue to build and invest in facilities, processes and manpower. 

- Benedict Soh, 2014 AR

Will they succeed? I definitely hope so since I have a stake in them.

My Action

I am holding on to my current holding and will continue to monitor the progress of the company through its quarterly report. I will not be adding more shares as it is already taking up near to 16% of my portfolio and there is no impetus for a higher stake. In fact, I might be reducing my holding if there is a need to raise cash to invest in another company that has a better story.

Portfolio September 2015

In August, I sold out on King Wan, Pan United and Soilbuild. Since then I have added increase my stakes in Kingsmen Creatives and Hour Glass. I have also added Capital Retail China Trust, ST Engineering and Parkway Life REIT. The following is my current holding:

For Income (52%)

REIT (31%)

Starhill Global REIT

Croesus Retail Trust

Capital Retail China Trust
Parkway Life REIT

Dividend Stocks (21%)

M1

ST Engineering

Design Studio

For Growth and Punting (36%)

Growth Stocks (29%)

Kingsmen Creatives

The Hour Glass

Punt (7%)

CDW

Food Empire

A sea of red

Wow, it's been quite some time since I see a sea of red in my portfolio. Anything new over the past month that cause the fall? Devaluation of China yuan could be a trigger and of course all other negative news which are not new.

What did I do? I was accessing my emotion as I witness the drop. Mixture of worry n excitement. Worry comes from companies which I have a position but did not do much research on. Excitement comes from how I can buy certain companies at a cheaper valuation or higher dividend yield now.

Specifically, I sold out King Wan, Pan United and Soilbuild at a loss. King Wan was sold due to concern of more impairment to come due to their investment in China. Pan United was sold to raise cash for other purchase as outlook of company might not be that visible in near term and this is probably a business that I don't quite have a grasp on. Soilbuild was sold to raise cash to purchase another REIT that has dropped significantly.

What further actions will I take? To purchase more shares of companies in current portfolio, and might initiate a position on Capital Retail China Trust.

Will update soon.

New goal and strategy

"Instead, I aim to achieve a liquid asset of $650 k by 2024 (CAGR of 14.5%).  This will be attainable through increase of both cash portion (including $40 k from insurance by 2023) and investment return. With some planning from 2025 to 2029, I will probably achieve my $1 mil target by 2029 when I am allowed to withdraw from my CPF with the option of not working from 2025."

The above was written in September 2007. Fast forward 8 years, I am glad to say that I have made good progress and would probably surpass the above target if I carry on with my model "Work, Save and Invest". I strongly recommend this model for those of you who just started working. More on this in another post. 

Changes in life priority and new learning have led me to review my model in recent years. I have come to realise that to achieve financial independence, I would need to generate sufficient passive income instead of just aiming to attain a certain amount by a certain year.  There are quite a number of ways to generate passive income. It's in my plan to check them out after I put in sufficient effort to review my investment portfolio.

As shared in an earlier post, my new model is "Invest, Cash Flow and Work". Moving forward, I am aiming to have my investment portfolio to provide increasing amount of cash flow, so that I can rely less on income from my work.  

I am treating my investment as a new business, with the current portfolio value being the initial outlay. At the moment, business growth will come from would have to come from growth of stock value and dividend. My target is to grow my portfolio by CAGR of at least 8%. To achieve this target and mitigate risk, I would allocate my portfolio with the following guideline:

• 60% of the portfolio will be invested in companies that regularly hand out dividend and provides a yield of about 5%.  REITs will form part of this 60% but no more than 40% of the entire portfolio.
• 40% of the portfolio will be invested in growth companies with consistent ROE of at least 10% or positive growth prospect. Out of this, no more than 10% will be used for punting on potential story.

No cash would be withdrawn from the portfolio before 2020. In the event that stock market crashes within this period, I might terminate my FD to load up more stock. A review would be made on portfolio allocation in November/December 2019. 

From 2020, cash would be withdrawn annually to supplement income from job till 55 when (AND IF) I can withdrawn my CPF beyond MSS. With proper planning on fund allocation at 55, I am confident that I would achieve my financial independence.

Sounds pretty similar to my updated plan in 2007 but it will be 5 years beyond the original plan. However, the different is that I have switched to part-time working from this year onwards. And who knows, with this new focus in investment (and some luck), I might still able to achieve my financial independence by 2024!

Hi there!

Thank you for visiting my blog. I thought I would do an introduction so that you can have a sense if its worth spending your time reading my posts.

Some background information. I am in my early 40s (2015) and have started my investment journey when I just joined the work force. Investment is the mean but the ultimate goal is to become financially independent. The goal remains the same but the strategies are certainly evolving. 

Lifestyle expectation is different for everyone and this affects the journey. For me, I am happy to stay at my current 4-room HDB flat, drive a family sedan/hatchback for 10 years (or extend COE if car price is still high), have a short getaways once/twice a year and a long trip once every two years, eat at restaurants only once or twice a week and basically to support my family expenses (parents' allowance, children's education etc)

So if you are expecting more, then what might be useful from my blog will be my review of the individual companies that I invest in.

Besides my pay, I grow my wealth through investment of Singapore shares. I pick up my financial knowledge on my own through books (will put up a list of books I like) and internet. I would like to see myself as value investor, but there were many moments that I succumbed to my emotions and "gambling" impulses.

Where am I now? Am I financial independent now? I am pretty please with my progress so far. Not fantastic but am better than what I set out to do. If I have continued what I was doing (working full time, climbing the ladder and investing part-time), I am pretty sure I can achieve my original goal of achieving financial independent in 2024. However, life priority changes over the years. I have decided late last year to spend less time at work and more time with family and myself. With this change and no other major changes (probably there will) in the next decade, I will be able to be financial independent at 55 (WHEN and IF I can withdraw my $$$ from CPF).

In a nutshell, my posts are relevant to you if 

• you are in the early 20s and 30s and looking for ways to grow your wealth; AND
• you are satisfied with a simple life-style

Or

• you are simply looking for views on certain companies that you are interested in.

Starhill Global Reit

"Since its listing on the Mainboard of the Singapore Exchange Securities Trading Limited on 20 September 2005, Starhill Global REIT has grown its initial portfolio from interests in two landmark properties on Orchard Road in Singapore to 12 properties in Singapore, Malaysia, Australia, China and Japan, valued at about S$2.8 billion as at 31 December 2014." - Retrieved from http://www.starhillglobalreit.com/profile.html, 8 March 2015

I first purchased Starhill in 2012. I was attracted by its holding of Wisma and Ngee Ann City and overseas holding. Without looking at the financial specifically but just on the reported dividend and NAV, I felt that it was undervalued and decided to buy it. So far, I am happy with my purchase and am glad with its growth.

Based on 2013 AR, Wisma and Ngee Ann City contribute 67% of NPI, while Lot 10 and Star Gallery in KL contribute 15%. David Jones and Plaza Arcade in Australia contribute 10%, Renhe Spring Zhongbei in Chengdu contribute 5% and Japan properties 2%.
The group has also grew its revenue, properties income, total asset and dividend over the past 5 years as shown below.

- Annual Report 2013

The latest unaudited year end report continue to show a good set of numbers, resulting in an increase of DPU by 5% to 1.29 cents. If the group can sustain this dividend, the current dividend yield is about 6.2%. Its NAV is $0.93, hence the counter is currently selling at a 10% discount. Gearing stands at 28.6% which seems low compared to other REITs and Business Trust. This also give it leeway to look for further opportunities to grow.

With this set of results and past track record, I will continue to hold on to my shares. Not getting more at the moment as it currently takes up 10% of my entire portfolio. However, i might re-look at my decision once i completed analyzing the rest of the companies in my portfolio.

First post after 5 years

It's been such a long time since I last wrote. Many things have happened. Some major decisions made at the beginning of this year. And one of them is to switch from current model of "Work, Save, Invest" to "Invest, Cash-flow, Work" to achieve financial independence. 

Re-read what I wrote in 2007 where I want to achieve 650k by 2024 and 1mil by 2029 with both cash, investment return and CPF. Then I was planning to work full-time to 50 years old and thinking 1 mil would probably last me for the rest of my life with proper planning and return. 8 years have passed, kids came along, parents are ageing and priority in life for me has definitely shifted towards having more time for family and myself rather than at work.

And since the new model is to "Invest, Cash-flow, Work", I am going to re-start my investment journal. Not sure how frequent I can do it so that it's sustainable but let's start with a target of at least an entry per fortnight.

Also, having started this journey for 15 years, I would like to share what I have learned, so that it might benefit those who have just started on the journey.

So stay tuned for more posts.