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All those analyst big mouth anyhow give target...

Owl793      ( Date: 28-Jul-2017 18:02) Posted: a big disapppointment to many loyal supporters who didn' t sell when 90+. previously someone estimated $1.00+ post disposal of KUE & Guggenheim. Off target by some much, unbelievable.

 

a big disapppointment to many loyal supporters who didn' t sell when 90+. previously someone estimated $1.00+ post disposal of KUE & Guggenheim. Off target by some much, unbelievable.

 

The NAV after selling KUE should be 0.48. It was reported that the selling for Guggenheim will increase the NAV by 0.29. Therefore, the new NAV should be around 0.77.

I just sold this morning as i will prefer to get the money now .... might need to wait few months to get that sum back. Furthermore, i' m not sure if there could be other cost for (liquidation), and admin & legal  charges pertaining to the sales, and also the operating cost for the next few months which might eat into the 0,77. I prefer to take profit now.

 

Profit from KUE & Guggenheim if added to net assets should be higher than 74c? Anybody can advise why share price is stucked at 74c.?

 

Today SGX really got good news..

 

Keep going up.. Good news coming?

 

I' m taking the assumption that K1 will own close to 5% of  Guggenheim common units which comprises of   250k, 11.1M (after warrant conversion), and 1.85m. The warrant conversion cost will come from the preferred shared.

If we based on the AUM multiples of 2.5, the estimated K1 share should be above $1.

I just went in  more after  they announced that they sold KUE at $29M (Book value was around $6M) at around 0.64 which increases the BV by 5c, but the share price jumped only 2c. If they can sell KUE at more than 4x the book value ... i' m hoping that they can also fetch Guggenheim share at 2x (or if we use the AUM multiples of 2.5% .... it can fetch 3x the BV). However, this is just based on my assumption as the official BV of K1 is around 0.48.

nuthing03      ( Date: 08-Jun-2017 00:32) Posted: Yes, there is a cost in converting warrants, from what I have learnt in sch. After funding the conversion using PS, the FV doesn' t change much according to your AUM multiple valuation. Appreciate others' views on this. I have an alternative thought about it but it doesn' t solve the valuation of Guggenheim. k1 has the right to require Guggenheim to repurchase all or any portion of the Warrants at their fair market value on the sixth anniversary of issuance, thus k1 need not convert its warrant. Guggenheim will not suffer unnecessary diluation. Their proceeds will thus be the fair market value which is a black box.  nngeeh      ( Date: 31-May-2017 22:49) Posted: I interpreted that even after warrant conversion.... the total ownership will still be less than 5%. My question is that there is a cost to convert the warrant.... should we consider this conversion cost to derive the share price of K1? The total interest of less than 5% ( or close to 5%) is inclusive of 250k, 11.1M (after warrant conversion), and 1.85m. In order to convert, K1 needs another approximate USD$100M to convert the warrants   .... are they assuming using the preferred share (par value of $100M) to fund the conversion in their calculation?

 

Yes, there is a cost in converting warrants, from what I have learnt in sch. After funding the conversion using PS, the FV doesn' t change much according to your AUM multiple valuation. Appreciate others' views on this.

I have an alternative thought about it but it doesn' t solve the valuation of Guggenheim. k1 has the right to require Guggenheim to repurchase all or any portion of the Warrants at their fair market value on the sixth anniversary of issuance, thus k1 need not convert its warrant. Guggenheim will not suffer unnecessary diluation. Their proceeds will thus be the fair market value which is a black box. 

nngeeh      ( Date: 31-May-2017 22:49) Posted: I interpreted that even after warrant conversion.... the total ownership will still be less than 5%. My question is that there is a cost to convert the warrant.... should we consider this conversion cost to derive the share price of K1? The total interest of less than 5% ( or close to 5%) is inclusive of 250k, 11.1M (after warrant conversion), and 1.85m. In order to convert, K1 needs another approximate USD$100M to convert the warrants   .... are they assuming using the preferred share (par value of $100M) to fund the conversion in their calculation?   nuthing03      ( Date: 31-May-2017 21:44) Posted: yawnyawn Wrote:  At yesterday' s EGM, Jeffrey Safchik revealed that k1 owns more than 5% of Guggenheim initially and after some dilution over the years, the stake is below 5% and pretty close to 5% after adding in the converted warrants. To  nngeeh  , the ownership will be less than 5% if they dont convert the warrants. The stake (5%) -> think there is flaw in my post yesterday. 5% is approximately equal to 250k common units + converted warrants (We didn' t know its conversion ratio) + 1.85m common units (which is < 1% of full diluted basis)(unsure if we have to add this component)?

 

Thank You

john_sun      ( Date: 25-May-2017 10:00) Posted: -----BEGIN PGP SIGNED MESSAGE----- Hash: SHA512 The quality of the analysis here is good, I am glad to join this community. I am a portfolio manager from EDMW Capital and I will contribute more on the Keppel Group of companies in the days to come. -----BEGIN PGP SIGNATURE----- iF4EARYKAAYFAlkmOpMACgkQGXql6RAabW/QqQEAgiNJUP8+GtrDWVe970xKoN3/ MIZQ2BnRQ5WgU3Wy8U4A/2jPc7XllFK3mf30IKJn3bkgN6G2rQmGCg26HHDsIBUC =/5pJ -----END PGP SIGNATURE-----

 

1st capital reduction = 65cents?

 

Capital reduction coming?

 

Kue LP3 sold at $29m based on sgx update. Is it better than expected sale?

 

UPDATED --  http://infopub.sgx.com/FileOpen/Divestment%20of%20equity%20interest%20in%20KUE%203%20LP%201062017_final.ashx?App=Announcement& FileID=456167

 

I interpreted that even after warrant conversion.... the total ownership will still be less than 5%. My question is that there is a cost to convert the warrant.... should we consider this conversion cost to derive the share price of K1?

The total interest of less than 5% ( or close to 5%) is inclusive of 250k, 11.1M (after warrant conversion), and 1.85m.

In order to convert, K1 needs another approximate USD$100M to convert the warrants   .... are they assuming using the preferred share (par value of $100M) to fund the conversion in their calculation?
 

nuthing03      ( Date: 31-May-2017 21:44) Posted: yawnyawn Wrote:  At yesterday' s EGM, Jeffrey Safchik revealed that k1 owns more than 5% of Guggenheim initially and after some dilution over the years, the stake is below 5% and pretty close to 5% after adding in the converted warrants. To  nngeeh  , the ownership will be less than 5% if they dont convert the warrants. The stake (5%) -> think there is flaw in my post yesterday. 5% is approximately equal to 250k common units + converted warrants (We didn' t know its conversion ratio) + 1.85m common units (which is < 1% of full diluted basis)(unsure if we have to add this component)?     nuthing03      ( Date: 31-May-2017 03:37) Posted: Seems like my earlier draft of below post was not posted.  PG53 of AR16 has shown the breakdown of Guggenheim.  Unquoted equity investments, at cost $8,066k, (containts KUE and 250,000  Guggenheim common share) Held-to-maturity financial assets, at amortised cost   $126,630k (should be worth par value when redeemed) (Seems like common shares and warrants' s cost is 0) Warrants $12,108k (not sure why it is worth that low) The warrants can either be converted to common shares or repurchased by Guggenheim.   If it was converted or repurchased,  Company has the right to receive the Additional Guggenheim Units (AR16: " k1 retains the right to receive an additional 1.85 million Common Units upon either a repurchase or redemption of the Warrants.  " , Circular: " being less than one per cent. of the total common units in the capital of Guggenheim on a fully diluted basis" ) So, if  Jeffery Safchik said  their stake was very close to 5 percent, i supposed it doesnt include their preference share and only ordinary shares. It doesn' t reconcile with  250,000 common units (4%!?) and  1.85 million  common units (< 1%) if we are to based it purely by number of units. Guys, correct me if i am wrong. Btw, I dont think we can use group cash as valuation since KUE' s cash will have been included inside in the group cash. (though it is immaterial as compared to Guggenheim).   Getting the valuation of Guggenheim approximately right is the key to k1 valuation.

 

Can someome explain in a layman term? ( Estimate also can)
0.7 to 1 / share after dispose the 2 assets?

 

yawnyawn Wrote:  At yesterday' s EGM, Jeffrey Safchik revealed that k1 owns more than 5% of Guggenheim initially and after some dilution over the years, the stake is below 5% and pretty close to 5% after adding in the converted warrants.

To  nngeeh  , the ownership will be less than 5% if they dont convert the warrants.

The stake (5%) -> think there is flaw in my post yesterday. 5% is approximately equal to 250k common units + converted warrants (We didn' t know its conversion ratio) + 1.85m common units (which is < 1% of full diluted basis)(unsure if we have to add this component)?  

 

nuthing03      ( Date: 31-May-2017 03:37) Posted: Seems like my earlier draft of below post was not posted.  PG53 of AR16 has shown the breakdown of Guggenheim.  Unquoted equity investments, at cost $8,066k, (containts KUE and 250,000  Guggenheim common share) Held-to-maturity financial assets, at amortised cost   $126,630k (should be worth par value when redeemed) (Seems like common shares and warrants' s cost is 0) Warrants $12,108k (not sure why it is worth that low) The warrants can either be converted to common shares or repurchased by Guggenheim.   If it was converted or repurchased,  Company has the right to receive the Additional Guggenheim Units (AR16: " k1 retains the right to receive an additional 1.85 million Common Units upon either a repurchase or redemption of the Warrants.  " , Circular: " being less than one per cent. of the total common units in the capital of Guggenheim on a fully diluted basis" ) So, if  Jeffery Safchik said  their stake was very close to 5 percent, i supposed it doesnt include their preference share and only ordinary shares. It doesn' t reconcile with  250,000 common units (4%!?) and  1.85 million  common units (< 1%) if we are to based it purely by number of units. Guys, correct me if i am wrong. Btw, I dont think we can use group cash as valuation since KUE' s cash will have been included inside in the group cash. (though it is immaterial as compared to Guggenheim).   Getting the valuation of Guggenheim approximately right is the key to k1 valuation.

 

Hi Bro,

You are right. I forgot to convert it to SGD. If you convert it using  exchange rate of 1.4, it' ll be close to 1.05/ share. However, we have not included the cost of warrant conversion of $9/ warrant. If you convert at $9/ warrant, 11,111,111 will cost around USD 100M ... which works out to be around SGD $0.32/ share.

If there  many Guggenheim  common shares today, and if you average out  with the estimated value of 2.5% of   $260B, and the unit price of the  common share is below  $9 ... the warrant  will be worthless (unless they calculate the premium as i believe the expiry is 3 years later).  I have other  questions:

-  The circular states the ownership is less than 5%. Does K1 need to pump in another $100M to convert the warrant into common shares  to make up this 5%? Do we need to include the cost of 0.32/share in our calculation?
- What is the exact number  of Guggenheim shares today? Without this information, we won' t be able to estimate the share price of Guggenheim share ... and won' t know if it make sense for K1  venture to convert it as part of the calculation. If they  don' t convert (because the  current estimated share price is less than $9), will  the ownership still be 5%?
 

Quant27      ( Date: 30-May-2017 08:20) Posted: Nngeeh, That is a good alternative way of valuing K1. The downside of the method that i suggest is that preferred shares are not really valued as per common stock. However the warrants that they have will provide a good upside kick given the increase in AUM of Guggenheim. Another issue is that dilution may have occured from 2011 to 2017. Your valuation method is contingent on knowing with some accuracy their ownership stake for Guggenheim and the multiple of AUM with which to value the business. The circular states that ownership in Guggenheim is less than 5 percent. Fortunately according to the valuebuddies thread Jeffery Safchik in the AGM did say that their stake was very close to 5 percent. Now what is the multiple that we should use to arrive at a valuation of Guggenheim. Jeffery did also say that guggenheim was a well run company. Does that also mean that it deserves a higher AUM multiple when it comes to valuation? Given that market cap multiple of fund houses ranges from 2.5 to 7 percent, your 2.5 percent of AUM seems conservative. My guess is that 3.5 percent of AUM is not too far off the mark. If that is true then the value of the K1 is at least 1.39*260000000000*0.05*0.035/433123585 = 1.46. Alternatively if you assume a 2.5 percent of AUM multiple then the value of K1 is at least 1.39*260000000000*0.05*0.025/433123585  = 1.04. So even without considering the KUE valuation this already provides a return of at least 70 percent relative to current prices.  PS:I think you may have forgotten to multiply by the USD/SGD exchange rate when deriving your S$0.75/share number.    nngeeh      ( Date: 27-May-2017 23:46) Posted: Hi Bro,  I looked thru the announcement again and I don' t think you can extrapolate the figures based on Guggenheim' s AUM values.  In 2011, K1 invested 100M on 100,000 preferred units (7% coupon) that comes free detachable 11,111,111 warrants. In 2012 financial report, they mentioned they received a further 250,000 common units. As Guggenheim is not a public list company, we do not know the actual total number of Guggenheim' s common shares and the values of these common shares.  If we cast aside the values of common shares and warrants... and just focus on preferred shares... the   net values will the par value of $100M + 7% annual coupon. If you look at the preferred shares of Hyflux or Genting... the value doesn' t appreciate like the common shares. Even if the AUM of Guggenheim has grew from $80b to $260b, the values of the preferred shares will still be par values + interest. It won' t translate into 3x (260/80)... the value of preferred shares will remain the same + the potential coupon. Surprisingly, in the EGM circular on page 9 ...the projected book value is USD 101M.. which is almost the par value of the preferred shares. It seems that they ignore the value of common shares and warrants. Is anyone aware on whether the preferred share is convertible or non convertible? The main question now is how to determine the value of 250,00 common shares and 11,111,111 warrant?   On page 7 of the circular, it is mentioned below that their investment is equivalent to around 5% of capital... is the capital here referred as 5% of the total shares of Guggenheim? * In addition, the Company has the right to receive the Additional Guggenheim Units (being less than one per cent. of the total common units in the capital of Guggenheim on a fully diluted basis, and when combined with the Guggenheim Interests, less than five per cent of the capital of Guggenheim on a fully diluted basis) on the Repurchase Date   If this 5% is referred to as the number of shares... then... we could use the standard calculation using AUM values. The market cap of fund house is normally around 2.5-7% of the AUM values. As Guggenheim manages around $260B, 2.5% is around $6.5B. If K1 owns 5%... the estimated values should be USD$325M. This is equivalent to SGD$0.75/share. The KUE   worthy around SGD$0.0159 per share and cash worths SGD$0.0577 per share. This translate into SGD of $0.82 per share. This estimate is dependent on whether K1 will get 5% equivalent of Guggenheim market cap and the value is based on 2.5% of AUM values. If they use  Appreciate if anyone can help to provide your view

 

Seems like my earlier draft of below post was not posted. 
PG53 of AR16 has shown the breakdown of Guggenheim. 

Unquoted equity investments, at cost $8,066k, (containts KUE and 250,000  Guggenheim common share)
Held-to-maturity financial assets, at amortised cost   $126,630k (should be worth par value when redeemed) (Seems like common shares and warrants' s cost is 0)
Warrants $12,108k (not sure why it is worth that low)

The warrants can either be converted to common shares or repurchased by Guggenheim.   If it was converted or repurchased,  Company has the right to receive the Additional Guggenheim Units (AR16: " k1 retains the right to receive an additional 1.85 million Common Units upon either a repurchase or redemption of the Warrants.  " , Circular: " being less than one per cent. of the total common units in the capital of Guggenheim on a fully diluted basis" )

So, if  Jeffery Safchik said  their stake was very close to 5 percent, i supposed it doesnt include their preference share and only ordinary shares. It doesn' t reconcile with  250,000 common units (4%!?) and  1.85 million  common units (< 1%) if we are to based it purely by number of units.

Guys, correct me if i am wrong. Btw, I dont think we can use group cash as valuation since KUE' s cash will have been included inside in the group cash. (though it is immaterial as compared to Guggenheim).   Getting the valuation of Guggenheim approximately right is the key to k1 valuation.

 

Interestingly, the fair value of K1 is the same using the AUM multiple approach (and a conservative assumption of 2.5 percent of AUM valuation of Guggenheim) as it is using the AUM growth approach (assuming that initial 100 million stake corresponded to an AUM of 80bn, ignoring the complexities introduced by the preferred shares and warrants, and the possibility of dilution in the interim):

AUM multiple approach => K1 value =  1.39*260000000000*0.05*0.025/433123585 = 1.04

AUM growth approach => K1 value =  1.39*100*(260/80)/433.128535 = 1.04!
 

 

Nngeeh,

That is a good alternative way of valuing K1. The downside of the method that i suggest is that preferred shares are not really valued as per common stock. However the warrants that they have will provide a good upside kick given the increase in AUM of Guggenheim. Another issue is that dilution may have occured from 2011 to 2017. Your valuation method is contingent on knowing with some accuracy their ownership stake for Guggenheim and the multiple of AUM with which to value the business. The circular states that ownership in Guggenheim is less than 5 percent. Fortunately according to the valuebuddies thread Jeffery Safchik in the AGM did say that their stake was very close to 5 percent. Now what is the multiple that we should use to arrive at a valuation of Guggenheim. Jeffery did also say that guggenheim was a well run company. Does that also mean that it deserves a higher AUM multiple when it comes to valuation? Given that market cap multiple of fund houses ranges from 2.5 to 7 percent, your 2.5 percent of AUM seems conservative. My guess is that 3.5 percent of AUM is not too far off the mark.

If that is true then the value of the K1 is at least 1.39*260000000000*0.05*0.035/433123585 = 1.46. Alternatively if you assume a 2.5 percent of AUM multiple then the value of K1 is at least 1.39*260000000000*0.05*0.025/433123585  = 1.04. So even without considering the KUE valuation this already provides a return of at least 70 percent relative to current prices. 

PS:I think you may have forgotten to multiply by the USD/SGD exchange rate when deriving your S$0.75/share number. 
 

nngeeh      ( Date: 27-May-2017 23:46) Posted: Hi Bro,  I looked thru the announcement again and I don' t think you can extrapolate the figures based on Guggenheim' s AUM values.  In 2011, K1 invested 100M on 100,000 preferred units (7% coupon) that comes free detachable 11,111,111 warrants. In 2012 financial report, they mentioned they received a further 250,000 common units. As Guggenheim is not a public list company, we do not know the actual total number of Guggenheim' s common shares and the values of these common shares.  If we cast aside the values of common shares and warrants... and just focus on preferred shares... the   net values will the par value of $100M + 7% annual coupon. If you look at the preferred shares of Hyflux or Genting... the value doesn' t appreciate like the common shares. Even if the AUM of Guggenheim has grew from $80b to $260b, the values of the preferred shares will still be par values + interest. It won' t translate into 3x (260/80)... the value of preferred shares will remain the same + the potential coupon. Surprisingly, in the EGM circular on page 9 ...the projected book value is USD 101M.. which is almost the par value of the preferred shares. It seems that they ignore the value of common shares and warrants. Is anyone aware on whether the preferred share is convertible or non convertible? The main question now is how to determine the value of 250,00 common shares and 11,111,111 warrant?   On page 7 of the circular, it is mentioned below that their investment is equivalent to around 5% of capital... is the capital here referred as 5% of the total shares of Guggenheim? * In addition, the Company has the right to receive the Additional Guggenheim Units (being less than one per cent. of the total common units in the capital of Guggenheim on a fully diluted basis, and when combined with the Guggenheim Interests, less than five per cent of the capital of Guggenheim on a fully diluted basis) on the Repurchase Date   If this 5% is referred to as the number of shares... then... we could use the standard calculation using AUM values. The market cap of fund house is normally around 2.5-7% of the AUM values. As Guggenheim manages around $260B, 2.5% is around $6.5B. If K1 owns 5%... the estimated values should be USD$325M. This is equivalent to SGD$0.75/share. The KUE   worthy around SGD$0.0159 per share and cash worths SGD$0.0577 per share. This translate into SGD of $0.82 per share. This estimate is dependent on whether K1 will get 5% equivalent of Guggenheim market cap and the value is based on 2.5% of AUM values. If they use  Appreciate if anyone can help to provide your view. Quant27      ( Date: 24-May-2017 22:22) Posted: The market clearly does not understand how valuable guggenheim partners is. According to this website, the Guggenheim partners more than doubled their assets under management (AUM) from end 2010 to march 2012. It states that their AUM on march 2012 is US$160 bn which means that they had at most US$80 bn at the end of 2010.  http://www.chicagobusiness.com/article/20120804/ISSUE01/308049976/baseball-business-and-bones-are-signs-of-guggenheims-growth Now, Guggenheim' s AUM is now at least US$ 260 billion (see  https://www.guggenheimpartners.com/firm/) which means that  conservatively the US$100m stake bought in June 2011 is at least US$100*(260/80)m = US$325m (assuming that firm value is proportionate to AUM and that the AUM is close to 80m in June 2011) This means that the value of K1 shares is at least S$ 1.39*325/433.128535 = S$ 1.04 (since there are 433.128535 million shares outstanding for K1) which translates to a return of 72 percent at the current price of S$0.605 per share! Indeed i think that Guggenheim' s AUM should be at least US$ 300 bn which means that the fair value of K1 is S$1.20.