KH Group

The net sales of KH Group’s largest holdings weakened as expected, but the subsidiaries' profitability held their own better than expected and HTJ put forward really strong performance.

We cut our view of Indoor Group's value but also revised our view of HTJ's fair value upward. We are positive about the strategy to release value and the current price level prices the whole with a 25% discount to our sum of the parts calculation, but as the economic downturn plagues the Group’s three largest holdings, we do not see a fast route for repricing the share.

KH Group's H1 report turned to disappointment as the previously strong-performing crown jewel, KH-Koneet Group, started to suffer more than expected from the weak construction cycle. As a result, we adjusted our sum-of-the-parts calculation downwards. We still see clear value in the parts relative to the low current price, but it is realistic to expect value unwinding to occur only when the target markets for Indoor and KH-Koneet Group start to recover from their downturn.

KH Group's H1 report will be published on Thursday at 8 am. We have made some adjustments to the sum of the parts ahead of the report, but overall the SOTP remained close to our previous estimate. We still see clear value in the share relative to the low current share price and expect the value to gradually be released as the new strategy progresses.