k1 Ventures reward shareholders with dividends again

In my previous post, I wrote that k1 Ventures might reward shareholders with dividends due to the divestment of China Auto Grand for $32 million. True enough, in today’s announcement, the management of k1 Ventures declared tax exempt one tier interim dividend of 1.5 cents per share. The dividend will be paid to shareholders on 12 February 2015 but the counter will go ex-dividend on 29 January 2015. Even though I am not vested in this counter, I feel happy for those who had invested in this counter.

In the current financial report, k1 Ventures classified the divestment of Helm, the long haul transport leasing business, as “discontinued”. This move effectively made k1 Ventures asset-lite because the heavy burden of long term debts was removed. Currently, the Group did not have any borrowing and is focused on managing the current portfolio of assets. In a way, it is a good move that k1 Ventures is not making any new investments because this will enable them to focus and maximize value on the proceeds from any realization of assets and to return the same to shareholders.

On the balance sheet, the Group has a net current asset of $84.3 millions. The shareholders’ funds decreased from $256.5 million at 30 June 2014 to $236.5 million at 31 December 2014. The decrease was due to dividends paid to shareholders in November 2014 of $54.1 million offset by profit for the period of $34.0 million. The profit for the period was primarily attribute to a net gain of $24.1 million from the sale of the Group’s investment in China Grand Auto. The decrease in investments was mainly due to the sale of China Auto and a downward revaluation of the Group’s investment in k12, Inc. partially offset by currency movements attributable to the strengthening of the US dollar.

As an investment holding company, the business model of k1 Ventures is slightly different from other listed companies. Typically, venture capitalists like k1 Ventures has a “hatching” period of 5-7 years for their investment projects and would usually be involved in the management of the companies. Thereafter, they would harvest their investments and sold off their stakes for profit takings. Against this backdrop, the next divestment for k1 Ventures should be Guggenheim Capital, a global financial services group. The value of this investment is about $125 million and I expect the divestment to be in 2018.

As of now, the stocks has risen from $0.18 to $0.20, so clearly the market has already factored in this piece of news. Nevertheless, this price level is still substantially above the $0.135 per share offered by the management in their bid to take the company private in 2012.


SG Wealth Builder

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