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KFN Message Board

  • deepvalueboy deepvalueboy Dec 18, 2010 12:06 AM Flag

    fair value?

    The leveraged loan index is close to a yearly high -- the index is up another 2-3% for the quarter which probably means given the leverage in the structure KFN's NAV should be up 8-10% or so which would put estimated YTD NAV at somewhere between $9-9.50. The stock seems stuck at estimated NAV despite obvious growth opportunities whether that be PE investing, new CLOs down the road etc. etc. Does anyone have any view why performance of the stock has been blah as of late? I think this stock is very cheap and I expect the leveraged loan market to continue to increase next year with spreads grinding tighter. Will anyone ever value this stock on an earnings basis rather than at a value of no higher than book? Stock is trading at about 5x earnings or a 20% earnings yield which also seems very very cheap.

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    • These guys are the best of breed in the industry arent they? Being priced at book seems very cheap to me!!!!

    • Andy was annualizing the quarterly dividend which did reach $0.56. I think the upward trajectory will resume in 2011, but none of the analysts are projecting that kind of distribution increase ($0.40) - and they have been fairly accurate for the past few quarters with their numbers. My hope is that performance warrants a $12 share price by late spring and $15-$16 by end of year. I think your $26 goal will have to wait until 2012, but I am a patient man!

    • There is no question that the stock is undervalued. I think there are a variety of reasons that the stock has not surpassed $10. First, both times that the stock has made moves well into $9 range management announced a supplemental offering and momentum died and the stock retraced back to book value. Second, I think the turbulent summer scared a lot of investors to safer places. Third, I think the small market cap and low volume keeps KFN moderately under the radar. I have said on multiple occasions that KFN is sort of a "show me" stock and trades higher mostly around earnings after confirmation of continued progress. That being said, I think KFN is a great buy here, expect BV to increase to $10 range by May Q1 earnings announcement and Stock could approach $12. All of that assumes no unforeseen foreign economic or terrorist event.