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. |