Financial Grime 11 Sept 18
Sep 11, 2018 / News
Market news
K3 Capital – H1 Results Share Price 327p Mkt Cap £138m |
- Results. Revenue up 53% to £16.5m, marginally ahead of our £16.2m estimate (2017A: £10.8m). EBITDA up 64% to £7.4m (2017A: £4.5m) beating our estimate by 5.7%. Very attractive EBITDA margin improvement up from 41% to 45% helped by administration expenses growth of just 32% and variable staff costs as a percentage of revenue down to 11.8% from 13.6%. Net cash up 121% to £7.5m (2017A: £3.4m). All KPIs are improving with strong revenue growth across all three business segments: Knightsbridge +24%, KBS Corporate +43%, KBS Corporate Finance +78%. Deal fee income up 65% to £9.5m (2017A: £5.8m).
- Estimates. We upgrade our 2019E revenue number to £16.6m from £15.1m while our 2020E number moves up to £17m from £16.7m, driven by K3’s innovative ways of driving revenue through technology. Our EBITDA estimates move up to £7.1m from £6.5m (2019E) and £7.5m from £7.1m (2020E). 2021 numbers are also now included.
- Valuation. We upgrade our price target to 375p. K3’s PER FY1 is now in line with similar businesses producing comparable EBITDA margins and ROE, driving the rationale for our price target (see comps table on page 7).
- Conclusion. A year of significant growth that proves K3 Capital’s innovative approach to generating M&A deals is proven to work, disrupting the traditional relationship model and increasing efficiency through accurate and detailed data, manipulated by bespoke technology to deliver increasing volumes of sellers, buyers and transactions. The company’s innovative use of technology significantly lowers costs driving scaled growth of revenues. This has been the first full year as a public company and the results speak for themselves. K3 Capital have already emerged as the market leader and are likely to deliver substantial long term shareholder returns.
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