Steady as she goes
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'. Oil and gas is a tough place to be at the moment, but there are still pockets of strength which are helping KBC to not only keep its head well above water, but also deliver 10% growth in adjusted PBTA this year. In the Middle East the company has already secured £9m+ of contracts in 2015, including major awards to support NOCs. In downstream refining (~90% of 2014 sales) US Gulf Coast crack spreads (ie indicating gross margins) are bumping up towards their 5 year highs. And, whenever clients need to improve efficiency, KBC's proprietary technology enables them to materially reduce capital and operational spend. At today's AGM the Chairman will say that market focus and proactive cost control 'give the Board confidence that KBC will meet its expectations for 2015.' We make no change to our forecasts and 162p/share price target. Currently, at 110p/share, the stock trades at an undeserved discount to other smallcap IT peers and the wider oilfield services sector.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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