The "Alternative Investments" angle I'm not sure about but I do like the move into insurance broking ("General Insurance", which is what they have headed the paragraph, is a bit of a misnomer because that connotes actual underwriting activities, and the associated underwriting risks. But what they are looking to do is not that.)
As a long-term shareholder in listed insurance brokers AUB Group and Steadfast, the reason I like insurance broking as a business is because it is quite a capital-light and therefore generates high rates of return (>50% Return on Tangible Capital), although growing a broking business from scratch will take time, so acquisitions will need to be made.
The good news is that KPG's pretty handsome share price performance over the past 12 months means that the cost of equity is low, thereby facilitating shareholder value-accretive scrip-based acquisitions.
This was an accounting practice roll-up story.
Now it is a roll-up of accounting practices and insurance brokers.
Of course, the roadside is littered with the carcasses of roll-ups that didn't so much "roll-up" as they did "crash-down".
But the guy running KPG has a certain rare focus on, and understanding of, value which, when added to his not insignificant shareholding, should mitigate against anything dumb being undertaken.
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KPG Price at posting:
$1.57 Sentiment: Buy Disclosure: Held
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