Wednesday, 12 October 2016

New Position - Kingsmen Creative

I purchased 10,000 units of Kingsmen Creative at $0.62 back in August 2016. This works out to $6229.04 including all the additional cost. I have previously mentioned keeping track of all my stock transactions, and as such have included it in my transaction page.

There are many bloggers who have talked about this Company, Examples are here and here. Hence, I shall not further talk about it. The purpose of this post is to record why I thought about purchasing this stock for future reference.

The page where I looked at most for the decision making is here.

Financial Stability
The first thing I looked at was the solvency of the company. Will it still continue to exist? Cashflow is important for this. Borrowings and debt securities as of Jun 2016 is $12.397M. There is $65.988M cash and equivalent available.

A look at the total liabilities indicate that it is $123.054M. Trade and receivables, and gross amount due from customers for contract work-in- progress is $108.971M. Adding in the cash and equivalents, this amounts to $174.959M, which exceeds the total liabilities, giving the company buffer for some bad debts. The fixed costs (excluding depreciation) is $34.74M for half a year. Thus, with the amount of cash available, there is little doubt about the financial stability of the company in the short term. In the long run, due to the amount of cash buffer available at hand, as long as the company continues to operate profitably, with sound future financial decisions, its financial stability should be a given.

In terms of dividends, this is a company that gives out dividends consistently.

However, dividends had decreased over the years. In 2011 to 2014, it was 4 cents per share. However, in 2015 it was 3.5 cents and this year it was 3 cents, due to the challenging economic conditions.

The interior fit- out business that Kingsmen Creative is in, is often highly dependent on market conditions, and I would expect fluctuations with the economy. The cost of goods sold is often incurred to generate income. As long as the company attract sufficient revenue, to generate sufficient gross profits, so as to cover the fixed costs, it should still continue to make profits.  I believe, as long as profits are made, dividends will continue to be paid.

After Thought
The economy does not look good now. I'm in this stock for the long- run. As long as the economy improves, I believe business is likely to improve, as so will the stock price.

Let's see.

Disclaimer: I am not a financially savvy person, so what I'm going to write is based on what I deduce from my limited research and reading. This may not be an accurate account of the real scenario, and you are to exercise your own judgement on whether you agree with what I have written. I won't be held liable for any inaccuracies or omissions (see also my disclaimer at the end of the blog).

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