K1 Ventures

[Gin]

Valuing Guggenheim at 2% of AUM, and assuming k1 interest at 3%, the Guggenheim investment is probably worth between S$200-220 million.
Add a 10% discount to make it attractive for prospective buyers (k1 seems rather keen to sell), the net shareholder value is probably closer to S$180 million.
Based on the book value of S$150 million, the upside may not be that significant.

Typically for asset gatherers/managers the rate is in the region of 5%(I got this number form John Lim of ARA before when i asked him how to value an asset manager). I think 2% is rather low. If you look at Value Partners valuation the mkt cap to AUM is even much higher. 

as for k1 interest of 3% where did you get this number from?

5% in my book is rather optimistic, but valuation is always subjective.

3% is an assumption based on what k1 has indicated in the EGM circular: 

3.    INFORMATION ON GUGGENHEIM

On  13  June  2011,  the  Company  completed  a  US$100  million  investment  in Guggenheim, which is a US-based privately held financial services firm with more than US$200 billion in assets under management, receiving the Preferred Units, the Common Units, and the Warrants. 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 which it can require Guggenheim to repurchase from the Company on the third anniversary of issuance (i.e. in June 2020) at the fair market value at that time.

http://infopub.sgx.com/Apps?A=COW_CorpAn...032017.pdf

[Jacmar]

I don't think 5% is optimistic as these guys charge 2%+20% annually. So if you do a DCF fro the next 3yrs alone, 5% would be on a low side. as for the 3% stake, this is what I am not sure as guggenheim might have raise capital in between 2011 to 2017 and in which case the "less than 5%" could even be much less. Yes I think 3% stake would be a conservative estimate if there is no raise of capital by guggenheim. Let's ask this on march 29th.
The key to the valuation here would be the former. is it 2% or 5%. this makes a huge difference. I am sticking to 5% because guggenheim is a very well run and long history of PE.

[weijian]

Typically for asset gatherers/managers the rate is in the region of 5%(I got this number form John Lim of ARA before when i asked him how to value an asset manager). I think 2% is rather low. If you look at Value Partners valuation the mkt cap to AUM is even much higher. 

as for k1 interest of 3% where did you get this number from?

OK. Asking John Lim how much a company (like his) is worth......is akin to asking the barber how much should he charge for his haircut!

[Jacmar]

Typically for asset gatherers/managers the rate is in the region of 5%(I got this number form John Lim of ARA before when i asked him how to value an asset manager). I think 2% is rather low. If you look at Value Partners valuation the mkt cap to AUM is even much higher. 

as for k1 interest of 3% where did you get this number from?

OK. Asking John Lim how much a company (like his) is worth......is akin to asking the barber how much should he charge for his haircut!

OK let me explain. i didn't ask how much his company is worth. i asked him how to value an asset manager and he said typically in the west this is 5%. So go check if what he said is true. Not too difficult...there are PEs listed in US. as I mentioned earlier, value partners listed in HK is value at much higher than 5%.

[se2037]

Indeed, Guggenheim is known in the US as a quality manager. Was able to attract substantial sticky assets and the margins should be good given the emphasis on alternatives. This deal should be straight forward for management given the latest private valuations by Guggenheim. KUE RE anyone?

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[Jacmar]

KUE is a bit more difficult to value as it involves RE across america and it can vary by a lot region to region. take this as icing on the cake as the guggenheim stake more then cover K1 mkt cap. KUE is no small potato either as the US property mkt is on the upswing since 2011.

Bottomline is that it is difficult to put a valuation on K1 but I believed there is more then enough MOS. DYODD pls.

[ghchua]

KUE is a bit more difficult to value as it involves RE across america and it can vary by a lot region to region. take this as icing on the cake as the guggenheim stake more then cover K1 mkt cap. KUE is no small potato either as the US property mkt is on the upswing since 2011.

Bottomline is that it is difficult to put a valuation on K1 but I believed there is more then enough MOS. DYODD pls.

Must take note that KUE have gearing too as those RE are debt funded. Unless u know exactly how much debt and how much their RE is worth, difficult to value

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[GreedandFear]

Typically for asset gatherers/managers the rate is in the region of 5%(I got this number form John Lim of ARA before when i asked him how to value an asset manager). I think 2% is rather low. If you look at Value Partners valuation the mkt cap to AUM is even much higher. 

as for k1 interest of 3% where did you get this number from?

OK. Asking John Lim how much a company (like his) is worth......is akin to asking the barber how much should he charge for his haircut!

OK let me explain. i didn't ask how much his company is worth. i asked him how to value an asset manager and he said typically in the west this is 5%. So go check if what he said is true. Not too difficult...there are PEs listed in US. as I mentioned earlier, value partners listed in HK is value at much higher than 5%.

My understanding is that Guggenheim is primarily a fixed income investor and as such, they are likely to earn much lower fees than an equity manager or private equity manager and hence to be valued at much less. Also, with USD interest rates rising, fixed income managers are likely to see outflows. Hence, I would think that you need to be cautious on valuations, unless Guggenheim has a very high value biz that we are not aware of (it is a bit of a black box). A possible comparison could be made with Pioneer Investments which was sold to Amundi investments in December 2016. According to Bloomberg, Pioneer has EUR 222 Billion of assets under management and the price was EUR 3.7 Billion or 1.67% of assets.

No longer vested

[Jacmar]

I don't think you can say that GGH is a fixed income investor. They are quite diversified. Here is what I got from their website:

We deliver value through three primary businesses:

Investments
Premier asset manager and investment advisor with expertise in fixed income, equity, alternatives, and advisory solutions

Securities
Full-service investment banking and capital markets capabilities including advisory, financing, sales and trading, and research

Insurance Services
Comprehensive advice for insurance companies on asset liability management, capital and expense management, and transactions and products

There is actually a PWC report as of 6/30/2016 listing all the asset managers price/AUM. As expected it varies by a lot from <1.3(janus, state street) to >7(Blackstone,kkr, oaktree). However the average is 2.5. If you take 2.5 for GGH, then the maths is : usd260000x0.025x0.035(i take this as k1 share of GGH)x1.4= current mkt cap of K1! the rest of KUE n cash in co is extra.

[yawnyawn]

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.