Market research : KJL:WSE

Kejo Merlin Land Group (KJL:WSE)
https://www.wselive.com/trade/order_entry/296

Net Tangible Asset: L$1.520
EPS: L$0.048
P/E Ratio: 22.95
Monthly Revenue: L$17169061.00
Monthly Expenses: L$16610990.00
Monthly Earnings (Net Profit): L$558071.00

KJL is an “European” based real estate company and as such suffered fully from the new VAT directives applied through Linden Lab and was forced to adapt its structure to the new situation. This will cause extra one time costs which will influence the financial figures for October negatively.

However, we also have to look at the positive aspects of KJL. It looks as SL is still expanding and real estate will remain a key economic driving force in SL.

Systems which combine a good management system (rental or selling), good design, excellent customer services and attractive prices will continue to find a challenging environment. KJL will be one of those.

In the last four months KJL just developed from 5 up to 32 SIMs which is an impressive growth rate and this with an occupancy rate of 90%. The merger with DDE failed but KJL hasn’t changed its growing strategy which is focused on the development of private SIMS, the Kat continent but also a costumer build tier solution system with SSL server connection. Latter allows to pay tier in RL-currency and over PayPal. Already 20% of KJL land owners are using this specific service.

The VAT issue affected the real estate business but on the other hand is also opening the door to new challenges.

On the cost side we will find the one time costs for the creation of a RL company in UK with VAT number which was registered last week. These costs are estimated to be more than 1 million $L which will influence the financial report of KJL for October.

Further operational annual fees (accounting and taxation) will be fully credited on KJL. The return on VAT on the other hand will be returned to KJL.

The fact that KJL is linked to a RL company will open new businesses with RL-companies wishing to use SL as their 3d-Webportal or as experimental marketing platform. Basically a huge potential can be seen in this development..

Because of the VAT issue the figures for KJL will not be good in the next month. However, we think that KJL is able to digest all these investments and continue to growth with the same speed as till now. Further measures of KJL to increase share holder value like shares buy back program or + dividend adjustments cannot be excluded.

However, one question is not yet answered. The failed merger must have changed plans of Kejo considerably. He actually owns <50% of the shares. What happens if he continues to reduce his parts in KJL. more.

We rate KJL at the moment with HOLD but see the development in three months time positively if circumstances develop as outlined. Target share price 1.2 $L /share and a dividend of 0.025 $L / share

Positive aspects:
• Experienced management team
• Clear and well adapted business model
• Combination SL:RL company opens new business challenges
• Consistency of business and dividend history
• Good communication skills towards share holders
• Future outlook looks promising despite VAT issues

Negative aspects:
• Heavy investments reduce profitability in the next months
• SL:RL relationship need to be mastered first
• Future of KJL as legal entity. What are the consequences of the failed merger with DDE?


Casper Trebuchet
LEM, CEO
House of derivatives (LFB, LWI, LHH, LEM Knock-In WSEIndex as IPO)
Analyst, WSE