Kausha wrote:I believe you are are horribly wrong on KK. No way valuation of KK is below 15bob. Even on break up value basis KK's property is worth upwards of USD 500m.
The steady evolution of KK's gross margin over the past two years and the substantial operating leverage created by the cost compression and debt repayments should result in Ksh 6.5 Billion EBITDA in 2015. Knock off Ksh 1B Depreciation and another conservative Ksh 1B financing cost and you end up with PBT of 4.5B.
I am still waiting on a Tax Guru to enlighten us why KK did not paid Ksh 429m tax when they have a massive Kshs 2.2 Billion Deferred tax asset.
Should KK make this Ksh 4.5Billion profit certainly the deferred tax asset should offset any tax payables. Even at worst case assuming 30% taxation KK should end up with about 3B profit which is Ksh 2+ EPS. This is my personal forecast.
The deferred tax asset arises mainly from unused tax losses that KK made in the past and can only be used to offset tax in the particular line of business that gave rise to the asset. The current tax has to be deducted from the income despite the fact that it may not be pad as it is offset but the asset.
Out of the 429m, 10 m is the current income tax while the rest relates to movement in the deferred tax asset. This could arise from the fact that KK could be having unused tax losses in some countries they are operating in and not in others.
From the report the MD says ".....Further reduction
of net borrowings of Kshs 2.4 billion during the first
quarter of 2015 should result in closing net borrowings of approximately Kshs 7 billion at the end of the first quarter 2015. Management is confident in the Group’s strength to continue significant improvement in 2015, with the first quarter already delivering strong expected results with significantly lower net borrowings".
Considering the report was released on 24th March, it means that this is something that has already occurred and so I expect a very good HY performance.
If you don't want to go to plan B have a good plan A.