BKI Investment Company will conserve capital in readiness to snap up investment opportunities arising from an “ugly” fallout from Europe’s debt crisis.
The listed investment company on Monday posted a 5.2 per cent jump in net profit to $16.42 million for the six months to December 31, 2011 thanks to a 12.4 per cent surge in ordinary dividend income to $14.3 million.
But a repeat revenue rise during the next 12 months is unlikely as BKI pulls back on investment acquisitions to conserve capital.
“We like to keep our powder dry,” chief executive Tom Millner told AAP.
“So if something happens in Europe and there’s a significant correction in our market we’d like to be able to be in a position that we could act upon it.”
Speaking ahead of the opening of another European debt summit, he described the global market impact of any actions by European leaders as “ugly”.
“The only upside we’ve got is the duration of that ugliness,” he said.
“The best outcome would be a short, sharp fix.
“Globally on retail investors it … will be very negative and there will probably be scares of the global freezing of money.”
Mr Millner predicted Australia’s share market would continue to track sideways until there was clarity on how Europe manages its sovereign debt crisis.
As a result BKI’s $528 million portfolio has been heavily stocked with defensive companies – resources and energy stocks in particular – carrying little debt.
“We’re very positive on how short the globe is on energy and thermal coal, in particular, is probably going to play a big part there,” Mr Millner said.
BKI reaped the rewards in the first half of 2011/12, with operating income jumping 10.5 per cent to $14.1 million.
BKI’s shareholders will pocket an interim fully franked dividend of 3.2 cents a share, up 6.7 per cent on a year earlier.
Shareholders are currently receiving a grossed up yield of more than eight per cent, making the company a more attractive investment than many fixed interest products which offer rates below 5.0 per cent, Mr Millner said.
BKI’s portfolio made a net return of negative 2.3 per cent for the 12 months to December 31, 2011, outperforming the S&P/ASX 300 Accumulation Index by 8.7 per cent.
Its top stock holding was $81 million worth of shares in New Hope Corporation.
“We do remain cautious, however, of companies exposed to retail, media and manufacturing,” Mr Millner said.
BKI’s shares closed two cents higher at $1.205.
