KVB Kunlun shares drift down to magic HK$0.65 level – is CITIC going to come knocking?

KVB Kunlun Financial Group Ltd (HKG:8077), the Hong Kong retail Forex broker, has seen its share price decline over the past six months in the face of solid financial metrics. The results the broker showed for the second quarter of 2015 were robust, with revenues hitting an all-time high of HK$98.5 million, up more than 75% above the first quarter of 2015.

And yet, the share price is down. One share in the broker even traded briefly today below the HK$0.65 level (as low as HK$0.62). This is the the first time KVB’s shares have traded below the the level of the offer submitted by CITIC Securities Company Limited (SHA:600030) last fall – HK$0.65 per share.

The question is, with KVB continuing to perform well and the shares back down in price, will CITIC renew its bid to buy out the remaining 40% of the company it doesn’t own?

In June this year, CITIC refused to budge and made the same bid of HK$0.65 per share for the rest of KVB’s share capital. Now another offer seems more likely.

Furthermore, let’s note that the share prices of both KVB and CITIC have been dragged down by the recent turmoil across the Chinese and Hong Kong stock markets – CITIC share prices have lost more than 50% since mid June 2015. And yet, the volatility is good for KVB’s business and is set to make the broker more attractive for potential buyers.

This combination of factors may prove a very good occasion for CITIC to seize the rest of KVB.

KVB Sept 2015

Chart source: Google Finance.

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