“Seems like there’s a lot of tech stocks in your portfolio,” Derek from Finance.sg remarked once when we were at an Evening with AK.
I don’t really discriminate stocks into tech sector or whatever sector. As long as the business makes money, and makes sense, I like it. However, that comment struck a chord with me and I really did re-look at my portfolio.
I would like to talk more about tech stocks but I would save that for another loooonnngg post. One of the major risks about tech is their heavy dependence on macro trends and constant innovation within the company. Once I realised my overexposure to this risk, I decided to scout for other stocks to diversify into. Stocks that are not so dependent on technology or heavy innovation or macro trends.
Kingsmen Creatives seem to fit the bill. To sum it up in one sentence, Kingsmen Creatives has a prudent management that seems to be able to deliver results in an industry saturated with less able incumbents.
I opened a tiny position in Kingsmen Creatives at a price of $0.805. Tiny position so I don’t stress my cashflow too much. (I got volatile and unpredictable income unlike most of you who have stable jobs.) Tiny position so that I am compelled to learn and understand more about the company and industry over time. Also, I am still hoping that the bear market bleeds out the stocks even more to give me a cheaper price! (Current PE is 10.)
Kingsmen Creative experienced a recent fall in share price due to a 26.5% drop in revenue in its Retail and Corporate Interior’s Division. (S$56.6 million in 1H 2015, a 26.5% decrease from S$77.0 million in 1H 2014)
From the latest 1H2015 Press Release:
“The decrease was due to soft demand for interior design and fit-out services from the high-end luxury retail segment. The division, however, continues to see good demand for its services from the affordable luxury and travel retail segments. Key accounts for this division include Aldo, Michael Kors, Shilla Travel Retail, and Tiffany & Co.”
The high-end luxury retail segment is affected by slowing demand and general weakness in China.
I don’t think this problem is a permanent one. The industry may probably take some time to tide through its troubles and get the ball rolling again. An investor friend of mine pointed out that “Luxury goods appeal to human vanity and the current slowdown in the luxury segment may probably just weed out the weaker or less adaptable players.”
Besides, Kingsmen is still able to adapt and get its revenue from other areas like Exhibitions & Museums or from the more affordable retail segments.
Sure they may not enjoy high margins, but… as the Hokkien saying goes: Bo He Jiak Hei Ma Ho! ( No fish, eat prawns also can!)
From my scuttle-butting or research via word-of-mouth, it seems like the only other established player that can match Kingsmen Creatives in Singapore right now is probably Pico Inc. Other than that, the industry is made up of mostly smaller players that don’t really have the design or architectural capabilities of Kingsmen Creatives.
However, the management of Kingsmen have highlighted that their biggest risks would be western MICE(meeting, incentives, conferences, events) companies making inroads into Asia. That would be something to look out for.
Another risk often cited about Kingsmen is founder risks. That also is something to take note of almost every company. In the event that the founder/s leaves, we must watch if the replacement is able to continue to execute as well as the original founder/s. (Just like how the whole world is watching Tim Cook of Apple….)
Kingsmen Creatives is more of a diversification stock for my portfolio. I am looking to spread my bets outside of all my aggressive tech stocks like GoPro, Facebook, LinkedIn, PayPal, etc. Although technology may change, the creative minds of architects and designers are still needed to create wonderful structures and installations. And Kingsmen Creatives, with their track record of delivering, may prove to be best in the Asian market for now.
These blogs provide a more in-depth analysis of Kingsmen Creatives. So you can refer to them if you are interested to learn more about the company:
[ 3 More Undervalued Stocks to be Revealed ]
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