K3 Capital Share Discussion Threads

[texas_caddy] 08/12/2022 16:04

Had hoped for more than 350p here long term!

[doobz] 08/12/2022 16:03

What normally happens here, is it likely to be taken out at 350? That seems very low to me. Hoping others are also potentially making bids, would have hoped this to go for a fair bit higher than that

[74tom] 08/12/2022 16:01

Crikey, didn't expect a takeout offer of 350p to be RNS'd today!

The board of K3 (the "Board") notes the press speculation and confirms that, following receipt of expressions of interest from multiple parties, it is in advanced discussions with Sun European Partners, LLP, on behalf of Sun Capital Partners Group VIII, LLC, (collectively, "Sun Capital"), having negotiated with Sun Capital the key terms of a possible cash offer to acquire the entire issued, and to be issued, share capital of the Company at a price of 350 pence per K3 share (the "Proposal").

Seems very accomodating to agree a 350p offer price given Shore Capital issued the 410p price target a few weeks back...

[w13ken] 08/12/2022 15:51

Just spotted my first 2023 share tip list and K3C are on it courtesy of Justin Waite @SharePickers. Decent podcast too.

[rivaldo] 08/12/2022 15:42

Nice move up - back to 350p for starters per the chart?

[johndoe23] 08/12/2022 14:50

314.6 to buy MM's moving up 4 on bid at 300p

[2bluelynn] 08/12/2022 14:26

Just tried to buy a £2000 worth and AJBell are not excepting on line buys I then tried £500 ! Still not taking online orders . . Just tried a dummy sell and quoting full 310 pence Think this is going up??

[2bluelynn] 08/12/2022 14:22

Cheers for the in-depth reply ,really interesting and you obviously know your market .

[my retirement fund] 08/12/2022 14:17

K3 seem to have a business model that could see the group grow both organically and through acquisitions to triple in size over the next decade. Such a plan we'll executed could see the shareprice multiples higher than today

[adipsia1] 08/12/2022 12:37

The whole UK accountancy market is in a state of flux with Big 4 firms splitting off their non-audit, transactional service lines (restructuring and corporate finance (M&A) which are they key areas that FRP and K3C operate in. Deloitte have separated their restructuring business into Teneo and KPMG have done similarly with Interpath. Teneo and Interpath will tend to pick up much larger international restructuring cases than either FRP or K3C could currently handle.Other key operators in the UK include a number of American restructuring specialists like Alvarez & Marsal and Kroll. Kroll probably being closer to FRP in terms of their restructuring market. Some kind of a merger between K3C and FRP would be an interesting possibility. It would certainly create a dominate the UK market. Aside from that I would imagine an American PE fund would be the most likely candidate for such an acquisition.

[2bluelynn] 08/12/2022 12:12

7atom Im a long term holder had these for a while and looking forward to the next statement.... I see the naked trader mentions K3c might get snapped up at some point by another company . Which or who would be big enough to do this ? Thanks in advance if any one has any thoughts

[74tom] 08/12/2022 11:39

Thanks for the additional context adipsia1. Really helpful to know the evolution profile of FRP vs K3C, based on what you've said there appears to be no fundamental reason for the valuation discrepancy between the two companies. Also makes sense re. BEG, their gross margin for last FY was 43% vs the 65% achieved by K3C which is materially lower & reason in itself for a lower rating.

Fingers crossed your conviction gets rewarded Ken, a substantial re-rating would certainly make sense!

[w13ken] 08/12/2022 11:08

Great summary Tom and I like your forecasts. I've been invested with K3C for a few years now - it's my #1 holding and over 25% of my portfolio. I've kept the faith and I'm looking forward to a proper rerating this month.

I have condensed your post in 280 characters for a tweet with a DYOR caveat:


It's good to get analysis like this out to different platforms. Thanks Tom...Ken

[adipsia1] 08/12/2022 10:44

Excellent summary. Totally correct with comparisons between K3C, FRP and BEG. K3C are much closer to FRP although the K3C restructuring division does not attract as many larger cases. FRP also has an M&A element to its business but this has mainly been growing as the result of acquisition rather than organically. The fundamental difference between K3C and FRP is that K3C have evolved from a business sales background with bolt-ons in restructuring and tax advisory, whereas FRP come from a restructuring background with bolt-ons in business sales.They appear to be on convergent paths, business-wise. BEG are still fundamentally high-volume/low-value liquidations with services peripheral to insolvency.

[74tom] 08/12/2022 10:04

First up fair play to Shore Capital for highlighting the opportunity here and setting a positive but realistic share price target of 410p.

To my knowledge there are 3 small to mid cap professional services / corporate advisory companies listed on LSE;

FRP Advisory
Begbies Traynor
K3 Capital

Looking at their financial metrics, pre tax profits for 2023 are forecast as being:

K3C: £20.5m
FRP: £24.1M
BEG: £20.3m

- Forward PE for 2023 (based on Sharepad data)

K3C: 13.5
FRP: 21.2
BEG: 14.5

- Balance sheets are all similar with the three companies having net cash at the end of their last financial year of:

K3C: £11.5M
FRP: £18.1M
BEG: £4.7M

- Dividend Yield is currently 4% for K3C, 2.5% for FRP and 2.4% for BEG.

To my knowledge, Begbies are a specialist corporate restructurer with less diversification / growth potential than K3C. I definitely think it's fair to say that K3C is more similar to FRP than BEG.

At 410p K3C would be trading at 18.4x 2023 forecast earnings, so still around 15% below the current FRP valuation, this looks more than fair based on the metrics compared above.

It's also anomalous that both FRP and BEG are trading at all time highs whereas K3C sits some 25% below it's mid 2021 level despite performing extremely well in that time period and benefitting from the same market tailwinds as those two.

My suspicion is K3C have been under the radar of the wider market and are currently mispriced by between 25-50%, the dividend yield variance also suggests this, at a 2.5% yield it would trade at 460p (more in line with the YTD share price performance of FRP & BEG).

Certainly risk vs reward looks excellent here ahead of next weeks trading update, we already know that Q1 delivered revenue in excess of £20m which on a run rate basis would mean they are trading ahead of expectations vs the £79.5m forecast...

[johndoe23] 08/12/2022 08:12

Full 300p being paid first up

[johndoe23] 07/12/2022 18:52

Strange here it says 285p bid but on my HL account says 290p

[my retirement fund] 07/12/2022 18:13

Yes, record volume, someone is keen!

[johndoe23] 07/12/2022 17:37

Some huge buys today

[johndoe23] 05/12/2022 18:10

Market makers on thr defensive today

[my retirement fund] 04/12/2022 20:02

Will be interesting to see £3.50 here in record time.

[tole] 02/12/2022 18:53

https://masterinvestor.co.uk/equities/market-comment-and-small-cap-catch-up/K3 Capital Group (LON:K3C) – Shore Capital initiate with a BuyI was interested to note that brokers Shore Capital are rating this group's shares as a Buy.The £203m capitalised group, states Shore, is a professional services business advising UK SMEs, that has a volume-based approach that is resilient to cyclical downturns.The broker goes on to observe that transformational acquisitions have improved the balance of the business model to provide three distinct service lines (Business Sales, Tax and Restructuring).Shore Capital considers that windfall mergers and acquisition transactions and big-ticket administrations provide significant upside potential to its numbers.Initiating coverage of the company sees the brokerage rating the shares, currently at 292.5, with a 'fair value' of a handsome 410p.I like the feel of such an upside to these shares, especially ahead of an Interim Trading Update due out within the next couple of weeks.

[johndoe23] 02/12/2022 09:39

Someone buying a load at 300p

[dicktrade] 02/12/2022 09:35

2 reasonable buys paying in excess of 300 .
Bullish