Beats expectations and starts 2015 well
KBC is a leading independent provider of simulation software (70% of FY14 profits) and consultancy (30%) to the oil/gas sector. Its sophisticated technology enables customers to optimise their capital and operational spend - effectively allowing them to get 'more bang for their buck'. It is common knowledge that energy stocks have had a tough time of late due to the crude price plummeting from $110/barrel in June 2014 to below $55 today. However, what's less well known is that within this bloodshed, the oil refiners have actually held up pretty well. Very importantly for KBC as around 90% of the firm's revenues are derived from downstream petrochemical plants, iinsulating KBC somewhat from the worst of the industry's belt tightening. In fact, demand for differentiated services was the message from this morning's prelims where KBC posted a 'blowout' second half: a record £88m order book (up 40% from £63m in June) and an H2 Book : Bill ratio of 1.25. Furthermore, £40.5m of the backlog is expected to flow-through into 2015 which, along with several consultancy wins since the period close, provides good earnings visibility for this year and beyond. KBC has "started 2015 well" with a number of key consulting wins in the first two months and we maintain our 2015 adjusted PBTA of £10.5m which means KBC shares trade on a mean 10.7x 2015 PE (or just 8.3x if the cash is stripped out). Consequently we reiterate our target price of 162p/share versus the current 85p level.KBC Group is a bank-insurance group engaged in providing products and services mainly to retail, private banking, SME and mid-cap clients. Co. focuses on its primary markets of Belgium, the Czech Republic, Slovakia, Hungary and Bulgaria. Co. is also present in Ireland and, to a limited extent, in several other countries to support corporate clients from its primary markets. Co.'s main brands are KBC and CBC in Belgium, CSOB in Czech Republic and Slovakia, K&H in Hungary, CIBANK and DZI Insurance in Bulgaria, and KBC Bank Ireland in Ireland. As of Dec 31 2014, Co. had 1,601 bank branches. In addition, Co. had total assets of Euro245.17 billion.
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