JKH seeking acquisition targets in expansion drive
John Keells Holdings (JKH) could be considering more acquisitions as it seeks to expand and likely target sectors include hotels and firms in financial services, and food and beverages, where the conglomerate's existing businesses appear to have limited organic growth potential, stock brokers Asia Securities said.

"We also anticipate JKH to consider major new investments in high growth sectors such as telecommunications, power, health care, education and infrastructure, in which JKHhas relatively modest or no exposure, as JKH looks to embrace its role of 'portfolio manager' in the truest sense," it said in a research report.

Raising capital to finance any acquisitions is unlikely to be a problem given JKH's relatively under-leveraged balance sheet and premium share valuations, the brokers said.

JKH has just reported strong first quarter 2005 earnings with net profit of Rs 537 million, up 1,088 percent from the same 2004 quarter. Asia Securities has revised upwards its FY05 and FY06 net profit forecasts by nine percent and eight percent to Rs 2.8 billion (up 45 percent YoY) and Rs 3.3 billion (up 17 percent YoY) respectively.

"The key earnings growth drivers are forecast to be the transportation and leisure sectors, although the Food and Beverage sector's profit after tax contribution would improve due to the absence of VRS (voluntary retirement scheme) charges," the brokers said.

JKH's perceived acquisition interest is driven by the fact that organic growth is proving to be increasingly difficult within certain sectors. JKH has an "enviable" track record in identifying and adding value to under-performing acquisition targets, Asia Securities said.

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