Kingsmen reported a 2Q09 net profit of $3.5m (+8.3% yoy, +50.9% qoq), that is in line with our expectations. Overall, gross profit margin declined due to the larger scale projects undertaken at Universal Studio Singapore. Sequentially, earnings momentum accelerated along with rising margins. The group proposed an interim dividend of 1.5 cents.

Demand visibility remains strong underpinned by the IRs, the Orchard road revamp, the Singapore Formula 1 and repeat orders from well- known global brands. Its order book grew, up 25% to $208m during the quarter, of which $188m will be recognized in FY09. With a strong order book, the group is upbeat to deliver a stronger 2H09.

By end 2009, the group would have completed some $76m worth of contracts relating to the Universal Studios Singapore (USS). Phase 2 will commence in 2010. The non-mechanical works on the IR, which Kingsmen and other contractors can provide, can potentially exceed $300m. Besides, the MICE activities within the IRs will offer continuity to the group’s growth momentum in the long haul.

The group’s experience and track record in high-profile projects such as the F1s and the USS will be increasingly sought after in the global arena. This opens doors to boundless opportunities in the areas of F1s and themes parks worldwide. Growth is equally interesting on its interiors front. The group has been securing repeat orders from well-known global brands, most notably Polo Ralph Lauren, to provide fixtures for their shops in Europe.

Our earnings estimates and SOTP target price remain largely intact. Besides boundless growth potential, the company offers steady dividends. Positive catalysts will come from project wins relating to the IRs, the upcoming 6-month long Shanghai World Expo in 2010, and the Youth Olympics. Reiterate BUY.