News: KKT Konekt Ltd updates on outlook, page-4

KKT have recently outperformed the top end of their guidances. I think they will comfortably hit 5c EPS this financial year. I have them clearing $2m after all expenses and paying a 1c dividend (yes that is what I would like to see). With the new $10m facility and say $3m in deferred consideration, that leaves $9m for acquisitions. Its hard to work out what they are paying for these businesses, but going by the revenue run rate and the increase in margin, I feel they are getting them at around that 6-8 times EBITDA range. They could easily add another $1m in EBITDA without any further dilution.

I think KKT's track record over the last three years deserves a higher multiple, more like 15 times EPS or a 75c price target. As they win more contracts and add more acquisitions, the customer concentration of revenue will become less of an issue (basically the only negative thing about KKT atm).

Its not hard building a case that will see KKT in the $1.00 range within 12 months as well. As the price gets higher, the acquisitions become more accretive and the roll up strategy starts to build serious momentum. This is one of my only holdings where I feel comfortable adding on dips, and completely ignoring the chart (although the KKT chart is easily one of the best looking out there). A growth business that has no exposure to currencies is nice too.