Kingsmen’s FY08 posted record earnings of $14m that way exceeded our expectation by 27%. The out-performance was mainly due to stronger-than-expected revenue from the exhibition and museum divisions and better margins. Net profit jumped 51% led by revenue contribution from its Greater China subsidiaries and growth across all business segments.

The Exhibitions and museum division led revenue growth, up 79% driven by contributions from major exhibition events in Singapore and China. The division also successfully completed a few projects for Beijing Olympics 2008. The group’s interior division stood firm with a growing source of revenue from its fixture export business. Overseas contributions surged, up 33% to 59% of revenue, thanks to its persistent regional expansion efforts that led to expanded project flows & better margins.

Secured contracts as at Feb 09 more than doubled from a year ago to about $154m, of which $134m will be recognised this year. These contracts include more than $70 worth of projects relating to Universal studios Singapore and the F1 Grand Prix. Meanwhile, its interiors division is likely to benefit from expanding retail fixtures exports, as well as the opening of the IRs and new shopping malls in Orchard. In fact, there is 1m square feet of retail space at Marina Sands that Kingsmen can potentially tap on.

Net cash improved to $26.7m led by positive free cash flow of $14.6m. The board is recommending a final dividend of 1.5 cents per share. This brings total dividends paid for FY08 to 3 cents, representing a dividend payout of 40% and a yield of more than 10%. The strengthened cash position bodes well for business stability and dividend payout going forward.

We have increased our earnings estimates for FY09 and FY10 by 10-17% to reflect higher revenue & margins. With Singapore being one of the best MICE destinations even before the IRs completion, there is good potential that Kingsmen’s earnings will sustain beyond 2010. Its strengthening regional network will also be a strong growth engine. Maintain Buy at a higher SOTP target price of $0.85.