Behind KKR’s Discounted Valuations
KKR & Company (KKR) reported revenue of $375.5 million in 1Q17, beating analysts’ consensus estimate of $291.9 million. KKR posted earnings per share (or EPS) of $0.65 in 1Q17, beating analysts’ estimate of $0.49, mainly due to a rise in its transaction, management, and monitoring fees compared to 4Q16.
KKR’s current price-to-book ratio stands at 1.52x, lower than the ratios of its peers. KKR has been successful in attracting the attention of value investors. The company’s performance is expected to improve in 2Q17, as it’s expected to witness a rise in its management fees.
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KKR made deployments amounting to $5.4 billion in 1Q17, of which $3.5 billion was deployed in private equity. Of this $3.5 billion, the company deployed $1.9 billion in Asia. In public markets, the company deployed $900 million in special situations opportunities and direct lending.
On a trailing-12-month basis, KKR’s operating margin stood at 56.3%, higher than its peers Blackstone (BX) and Apollo Global Management (APO). On a trailing-12-month basis, Blackstone’s and Apollo’s operating margins stood at 48.4% and 47.6%, respectively.
Alternative asset managers (XLF) have higher price-to-book ratios than KKR & Company. KKR’s peers have the following price-to-book ratios:
- Carlyle Group (CG): 4.35x
- Apollo Global Management: 5.60x
- Blackstone: 3.36x