KKR & Co. L.P. (NYSE:KKR), a global alternative asset management company, declared pre-tax Economic Net Income (ENI) of $502 million during the second quarter, up from $144 million in the year ago quarter. Distributable earnings rose from $403.8 million to $701.0 million year on year.
The global giant had total assets under management (AUM) of $98 billion and fee paying assets under management of $79.7 billion as at the end of the quarter. It declared a distribution of $0.67 per unit (up from $0.42 in 2Q13), of which $0.41 constituted realized cash carry.
“Our realization activity in the second quarter drove the highest cash carry and total distributable earnings we’ve reported since going public, contributing to a quarterly distribution of $0.67. Additionally, our cash flow generation, investment performance, and balance sheet income resulted in a 29% return on equity and 22% cash return on equity over the last twelve months,” said Henry R. Kravis and George R. Roberts, Co-Chairmen and Co-Chief Executive Officers of KKR. “We also closed the KKR Financial Holdings LLC (NYSE:KFN) acquisition in the second quarter, bringing us recurring cash earnings and more permanent capital to grow the firm.”
This Tiger Cub Giant Is Betting On Banks And Tech Stocks In The Recovery
The first two months of the third quarter were the best months for D1 Capital Partners' public portfolio since inception, that's according to a copy of the firm's August update, which ValueWalk has been able to review. Q2 2020 hedge fund letters, conferences and more According to the update, D1's public portfolio returned 20.1% gross Read More
KKR’s quarter notable for excellent realizations
BMO Capital Markets analysts David J Chiaverini and Richard Fellinger note that KKR’s reported ENI of $0.57 was in line with BMO estimates of $0.60 after adjusting for equity based charges booked by the company that were not considered in estimates.
Strong markets enabled KKR & Co. L.P. (NYSE:KKR) to realize excellent gains reflecting in the quarterly distribution of $0.67 per unit.
Notable exits during the quarter were hospital operator HCA Holdings Inc (NYSE:HCA), Dutch company NXP Semiconductors NV (NASDAQ:NXPI), South Korean Oriental Brewery and Spanish aviation services company Avincis; in addition a stake in Sunrise Senior Living LLC (NYSE:SRZ) was sold off at a 500% return.
“We view KKR’s business model as unique in the alternative manager space owing to the significant use of its balance sheet to drive earnings growth, with more than 50% of earnings coming from its balance sheet and capital markets business,” said the BMO analysts.
Still finding investment opportunities in a bullish global environment
“KKR remains active with capital deployment, investing $2.4B (BMO $2.5B) in the quarter,” observe the analysts. “The company continues to leverage its global footprint (65% of deployment YTD outside U.S.), including making its first investments in South America and Africa during the quarter.”
The South American investment was the acquisition of Aceco, a data center business, while a stake in Afriflora, an Ethopian rose grower, was the company’s maiden African investment.
Rating and target
After factoring in the aforesaid equity based charges, BMO anticipate that ENI for 2014/2015 would be $2.53/$2.55 and accord a Market Perform rating to KKR & Co. L.P. (NYSE:KKR).
The analysts revise the Price Target to $27.
KKR & Co. L.P. (NYSE:KKR) is currently trading at $25.00.