K1 Ventures - RHB Invest 2016-02-01: 2QFY16 results highlights

K1 Ventures - RHB Invest 2016-02-01: 2QFY16 results highlights K1 VENTURES LIMITED BLT.SI 

K1 Ventures - 2QFY16 results highlights

  • The highlight of k1 Ventures (KONE SP)’ 2QFY16 results was a 21 cents/share interim dividend, which will be paid out on February 18. This arose as a result of a S$89.3m net profit generated from the group’s investment in Knowledge Universe Holdings, which sold its U.S childcare operations last August for US$1.5bn and distributed the bulk of the cash proceeds to its shareholders. 
  • Going forward, we expect KUH to continue to distribute cash to k1 as it had monetized its overseas operations in the UK, Malaysia and Singapore in the past 2 years and is currently in a cash-rich position. 
  • It continues to retain real estate interests in some 800 childcare centers in the U.S., which we expect to be divested in due course. k1’s remaining investment, Guggenheim Capital, is a financial services group which has seen massive growth in its AUM in recent years. 
  • The preferred shares in Guggenheim entitled k1 to a 7% annual coupon with a conversion option that could potentially deliver a return of 20% p.a. or double its investment cost in five years. 
  • k1 is currently in divestment mode and have distributed SGD230m in the past year. 
  • Following the stock’s recent 5-into-1 share consolidation and a $32.5m capital distribution, we adjust our TP to S$1.08. 
  • While the discount to NAV has narrowed following continuous distributions and a resilient stock price, we see limited downside and potential upside surprises from better-than-expected sale prices. 

Goh Han Peng RHB Invest | http://research.itradecimb.com/ 2016-02-01
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 1.08 Same 1.08