Keybridge slashes EPS on loan concerns

Keybridge Capital Limited yesterday cut its forecast profit, measured as earnings per share, by a third due to a 50 per cent provisioning for one of the company's largest loans.

Keybridge invests in and provides loans to assets including property, aviation, shipping and infrastructure, with the quarterly update also released yesterday stating the company currently had 32 investments, with an average investment size of $13 million.

The 50 per cent provision is over a $25 million loan, with the company's profit guidance for 2009 cut from 15 to 16 cents per share, to 10 to 11 cents per share.

"If you do take a particular provision of this magnitude in a period then it does have the potential to take five cents off your EPS in one year," said Karen Penrose, chief financial officer at Keybridge.

"What has happened in the last weekend is that the information we had, changed, and that is what has caused us to believe it was material for our earnings guidance.

"We think the level of provisioning is appropriate."

The Keybridge return on investment objective is 15 per cent upwards.

Aviation accounted for 29 per cent of the $422 million investments ending September 2008, with property 24 per cent, shipping 15 per cent, infrastructure 13 per cent and other 19 per cent.

The Keybridge transactional risk management policy does not allow asset classes to exceed 30 per cent.

The market punished Keybridge shares by over 40 per cent at one stage yesterday, with shares rallying intra day off twelve month lows of 38 cents to close at 43.5 cents, down 35 per cent on the day. Volume was heavy at 7.2 million. Twelve month highs are $1.76.

The board and management hold approximately five per cent of the Keybridge equity.