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4 Reasons To Feel Optimistic About Kingsmen Creatives Ltd’s Shares

Kingsmen Creatives Ltd (SGX: 5MZ) is a leading communication design and production group with a network of 21 offices and full service facilities around Asia. The company serves global clients through its four business divisions: Exhibitions & Thematic; Retail & Corporate Interiors; Research & Design; and Alternative Marketing.

Kingsmen Creatives’ share price closed at S$0.52 yesterday (19 October 2018), which is a 52-week low. It is natural for shareholders to feel nervous if they are taking cues from the direction of the company’s share price. However, here are four reasons to feel optimistic about Kingsmen Creative’s future prospects.

Upcoming opening of JEWEL at Changi Airport

There was a recent announcement that JEWEL, the upcoming ambitious lifestyle destination at Changi Airport, will be opening in late-March 2019. JEWEL will have more than 280 stores spanning 53,800 square metres, and almost 90% of its retail space has been taken up ahead of its launch. The massive retail and lifestyle complex will include flagship stores and brands, some of which are new to Singapore. Examples of the new names at the mall include Peruvian restaurant Tonito, as well as multi-label lifestyle concept store Naiise.

Note that the scale of JEWEL is similar to the Shoppes at Marina Bay Sands back in 2009, and could provide good revenue visibility for Kingsmen Creatives – the company is likely to bid for the interior fit-out contracts within JEWEL, as well as fabrication contracts for some of the permanent structures within the complex.

New headquarters in Changi Business Park

The company is in the process of shifting into its new headquarters located at Changi Business Park, and will vacate its Changi South Road premises by end-2018. My colleague Royston Yang visited the new HQ and this is what the exterior looks like:

With the new headquarters, Kingsmen Creatives could save on rental expenses (it pays around S$3.8 million in operating lease expenses every year). Though the company’s rental expense will be replaced by depreciation expenses on the new building, this is an accounting expense and will not affect the company’s cash flows. So, the company should start generating better cash flow from 2019 onwards as a result of the removal of rental expenses.

Order book at a five-year high

Kingsmen Creatives’ order book at the end of 2018’s second quarter was at a five-year high, as can be seen in the table below:-

This increase in the company’s order book resulted from better consumer sentiment as luxury retailers reported better sales this year. Kingsmen Creatives also recently reported that it was awarded S$29 million worth of contracts for the renewed Formula 1 Singapore Grand Prix, as well as S$22 million worth of contracts for both the National Day Parade 2018 and National History Event. These contract-wins demonstrate that business-flow remains strong for the company.

NERF Family Entertainment Centres

In February 2018, Kingsmen Creatives announced that it is partnering with Hasbro, one of the three largest toy companies in the world, to open NERF Family Entertainment Centres across South-East Asia. NERF is one of the top-selling toy brands by Hasbro and appeals to fans of all ages.

The concept of a Family Entertainment Centre is a new one and has never been done before in Asia. Kingsmen Creatives has the exclusive rights to design, construct, and run the FECs in the Asian region. The first FEC in Singapore is targeted to open in 2019, and may lead to Kingsmen Creatives forming a new business division, that of Intellectual Property ownership. This initiative should be an interesting development to watch to see how the company is evolving.

At the share price of S$0.52, Kingsmen Creatives has a trailing price-earnings (PE) ratio of 10.4 (on trailing earnings of 5.0 cents per share) and has a trailing dividend yield of 4.8%.

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The Motley Fool Singapore contributor Royston Yang contributed to this article. Royston owns shares in Kingsmen Creatives.

The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore writer Chong Ser Jing owns shares in Kingsmen Creatives.