Thursday 5 September 2013

Analysis of Kinnevik

A Swedish online and telecom investment company

Company: Kinnevik AB

Business: A Swedish investment company that have a heavy focus on telecom and online media. A well known online company that they own part of are for instance Zalando and in telecom they have for instance shares in Tele2 for the full list of investments then please go here.

Active: Via their investments they are present in 80 markets world wide. 66% of their investment companies sales are in Europe, 23% in South America, 8% Africa, 2% Asia and only 1% in North America.

P/E: 119.7

contrarian values for P/E, P/B, ROE as well as dividend
The P/E for Kinnevik was not good at all in 2012 with 119.7 which was due to extremely low earnings and the P/B is ok with a ratio of 1. Due to the poor earnings it becomes a no go according to Graham. The earnings to sales is ok with 30% but far from the previous investment companies that we have looked at. The ROE ended up being 0.8% which is completely unacceptable for an investment company in the long run. The book to debt is excellent with a ratio of 14.7 and I it makes me wonder a little why they do not (or why they have not) borrow/ed money cheap to make more investments. I find their company mixture strange having the telecom that today are valued very low and give high dividend with fairly low risks and then on the other hand a strong push into online activities with no dividends, massive expansion, high risks and yet the two industries are connected via internet. Their revenue growth has been -27% which comes from last year being an extremely bad year I would however expect more a growth in the line of 7% which would in that case give us a motivated P/E of 20 to 22 which means that based on last years earnings the market overvalued Kinnevik. For an investment company they pay a pretty high dividend that was 3.1% which then represented 375% of their earnings so they had to take it from their savings last year but that is not the normal case.

Conclusion: I would not invest in Kinnevik today. I find that their internet investments are risky and when it comes to investing in telecom I might as well do that myself. Their running P/E is currently at 26 so much, much better compared to when I look back at 2012 still that does not change my opinion about investing in Kinnevik.
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