Kingsmen’s $14.5m maiden contract with Resorts World at Sentosa indeed blossomed into largercontract wins from the Universal Studios worth $59.5m. This involves a contract of $42.5m todesign and build the theme façade, and provide area development works for part of the themepark, and a contract worth $17m to build the interior fit-out works for the F&B andretail/merchandise outlets within the theme park.

These 2 contracts which will be completed by Oct 2009 have already constituted 27% of ourFY09 revenue forecast. Despite the on-going contract wins, we are lowering our earningsestimates for FY08 and FY09 by 13% and 20% respectively in consideration of adjustment inrevenue recognition schedule expectations. Earnings visibility for the next 2 years is clear, led bystrong projects pipeline such as the Singapore Grand Prix, the Orchard ION, Universal Studiosand recurring interior fit out demand from its renowned client base.

Since the acquisition regional affiliates in Greater China, India and the Middle East in Aug 2007,the group’s overseas contributions has now accounted close to 70% of its revenue compared to40% in FY07. We reckon the group’s enlarged regional network will be a sustainable growthengine that opens doors to the limitless events and interior fit out demand globally. Overseasdevelopments have been positive so far as the group benefits from its clients’ global expansion(such as Burberry and Apple), and overseas exhibitions such as the Shanghai Expo.

The group is in a net cash position of $23.9m as at June 2008, generating free cash flow of$6.4m. Its strong war chest of cash, coupled with steady earnings growth will support the group’sgenerous dividend policy. We estimated the group will be able to pay another 1.5 cents DPS for2H08, bringing the total DPS for 2008 to 3 cents. This implies an attractive dividend yield of8.6%.

Against the doom & gloom, Kingsmen is immersed in sweet spot with mounting contracts frommega projects. At just 5x current PER, less than half the PER of its smaller competitor – Cityneon(12x PER), Kingsmen is clearly an undervalued stock which offers both growth and value.