There is no doubt about it! Usain Bolt is a great sprinter and based on his feats at the just concluded World Championships in Moscow, there are none close to him. However, his winning form on the track is yet to be transferred to his investment portfolio.
Well, that may be a broad statement but if the performance of his investment in KLE Group is anything to go by, he may lose all or most of his investment in the venture that we estimate is close to quarter of a million US dollars.
How did we get to this number? | When KLE went public last year, the prospectus indicated that 3,243,000 shares (“the Bolt Shares”) were reserved for Sherwood Holdings Limited, a company incorporated in Jamaica and owned by Bolt. Bolt’s company should have purchased the additional shares at a discounted price of $2.77 per share, which would have taken Sherwood’s shareholdings in the KLE Group to 10 million units. However, there is no indication that his company took up the shares nor if Bolt himself bought them. At the end of June, the top 10 shareholdings in KLE showed Sherwood Holdings holding 6,757,000 shares, the same as before the public issue. At $3.70 per share, the IPO price the public was asked to pay, his investment is valued at about US$250,000 dollars.
Poor performance | When KLE Group came to the market last year, its broker defended what many others considered to be a highly overpriced and extremely risky investment. Once again, the KLE Group has reported lousy results with a worsened loss position in the June quarter and a year-to-date loss of $36 million for the six months in 2013 when compared to a $9 million loss for the same period last year.
In the June quarter, the Group chalked up a loss of $18.5 million compared to just $2.8 million in 2012. Although revenues climbed to $84.7 million in the quarter, up from $72 million in 2012, a $24 million jump in administrative expenses killed any hope of a bottom-line improvement. Year to date, this line item is up $30 million over 2012, while revenues only increased by $15 million for the same period. Further aggravating the loss problem is interest cost, which remains relatively high despite raising fresh capital through the public issue.
It appears that most of the cash raised has been used to support the operating losses and to purchase fixed assets and property. Shareholders’ equity, which was $119 million at the end of December, is down to $83 million in June with interest bearing debt of $48 million. The group has burnt up a lot of cash with only $15 million left at the end of June. This not good news as losses seem set to continue. Also current liabilities are well in excess of current assets by almost 3 to 1 — an absolute no-no in business — even when income is mainly cash.
This one is not looking good at all. The stock price is down to $1.80 and is poised for more decline. Not good at all, for a stock that was issued at $3.70.
About the KLE Group | KLE‘s (Kingston Live Entertainment Group) first venture was the uber-chic Fiction Lounge launched in 2008 and located at the Marketplace in Kingston. In April 2011, Usain Bolt’s Tracks and Records opened its doors adjacent to the Fiction Lounge as a new addition to the Kingston restaurant and entertainment scene. Late in 2012, the company placed 27 million shares on the market, all of which were snapped up with lightening speed by investors. With the needed capital raised through the IPO, the KLE Group is to expand into other related ventures including a theme park and villa community on the north coast.
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Photo credit | www.deependdining.com