The group’s 1Q09 net profit rose by 8% yoy to $2.26m in 1Q08. Earnings look on track as 1Q tends to be seasonally weak. Turnover was lower due to the completion of a few large orders for fixtures exports in the previous period. Topline weakness was offset by higher corporate fee income, CPF job credit, forex gains, strengthening gross margins and lower taxes.

Despite lower revenue, gross margins improved from 25% to 26.9%. Improving margins reflect the group’s capability to assume higher value projects. Net margins improved as higher staff costs (+135 yoy) were mitigated by lower income taxes.

The group has secured contracts of approximately $167m as at 11th May 09, 38% higher from a year ago. $147m worth of contracts will be recognised this year, which have already made up 63% of our full year revenue forecast. Beyond 2010, the group will continue to be preoccupied with recurring orders from its blue-chip customers worldwide and MICE events regionally given its enlarged regional network.

The group has secured more projects relating to Universal Studio Singapore and is currently negotiating a few more projects. Numerous fit-out jobs that have been secured for branded boutiques at ION Orchard will be commencing very soon. There will be more fit-out jobs to come along with the two integrated resorts and new Orchard Road shopping malls scheduled for completion in 2009 and 2010. Meanwhile, the group is all set to execute the second F1 Singapore Grand Prix.

Kingsmen has been ‘recession proof’, still delivering fantastic earnings growth momentum. Its strengthening regional network also has shielded it against the downturn. At mere 5x FY09 PER, Kingsmen offers a good value proposition for a growing market leader in communications designs and production with good growth prospects. We project a dividend of 3 cents per share to be paid out this year. Maintain BUY with a SOTP target price of $0.85.