Today I sold all 100 Kas Bank shares (EPA:KA) I have, because of their results over the first half year and their outlook.
H1 summary of Kas Bank results:
- Net result H1 -40% from €8.5M to €5.1M
- Operating income H1 -3,4% from €53.6M to €51.8M
- Average Assets under Administration -9,0% from €490B to €446B
- Interim Dividend -36,4% from €0.33 to €0.21
Last year I often did increase my position in companies based on bad knews. I increased for example my position in Macquarie Infrastructure Company in February of this year and I also increased my position in Wereldhave in the same month.
This time I decided to close my position. In the case of Macquarie Infrastructure Company (MIC) and Wereldhave (EPA:WHA) in my opinion their outlook was still healthy despite some bad news which was announced. In the case of Kas Bank I have the idea that their underlying business won’t recover anywhere soon.
Mainly the decline in assets under administration with -9.0% bothers me. In 2017 the assets under administration were also down with -3%. Kas Bank is mainly active as provider of custodian and fund administration services to institutional investors and financial institutions. This means that Kas Bank main source of income is the fee they get for asset and transaction servicing. If assets under administration are down it means Kas Bank (EPA:KA) get less fee’s for safeguarding a firm’s or individual’s financial assets.
Kas Bank writes in their H1 press release that fierce competition resulted in loss of clients.
If a company announced bad news I tend to look at the cashflow and try to understand how the bad news will inflence the long term cashflow. In the case of Wereldhave and Macquarie Infrastructure Company it’s my (personal) opinion that the long term cashflow outlook is the same. For this reason I bought more shares. In the case of Kas Bank I think the long term cashflow is impacted structurally, because lower assets under administration means less fee income and if Kas Bank will be able to increase their assets under administration it’s probably because of reduced fee’s. In a market with ‘fierce competition’ I don’t expect they will be able to attract new customers against above average prices.
It’s maybe even a realistic scenario that Kas Bank has to reduce their fee’s to retain current clients at contract expiry.
For these reasons I decided to sell my Kas Bank (EPA:KA) shares. I purchased 100 shares of Kas Bank in October 2017 at a price of €9,96 and sold them today at €8,00. I received a dividend of €0,31 this year so the closing of this position can really be called taking a loss.
With the funds available from the Kas Bank sale I bought 150 shares Aegon (EPA:AGN) at a price of €5,24. I decided to buy Aegon, because I considerred, until today, Kas Bank as a steady fund in my portfolio with a stable dividend income, but without the expectation for huge share price increases. Aegon I also see as a steady defensive fund with a steady and relatively high dividend income.
With the purchase of 150 shares Aegon (EPA:AGN) I add €36,00 to my estimated yearly dividend income. The sale of 100 shares Kas Bank is reducing my estimated dividend income with €64,00.
This swap in my portfolio brings realising my 2018 dividend income further away, because Kas Bank has a dividend scheduled this year and Aegon also has 1 dividend payment left his year, but is already ex-dividend. Nevertheless it’s my opinion that this time I should sell on the bad news instead of ‘sitting out the storm’.