Analyst: KKR Estimated Income of $425M in 2010

NEW YORK (Reuters) – The proposed combination of Kohlberg Kravis Roberts & Co and its Amsterdam-listed fund would have estimated earnings of about $425 million in 2010, an analyst at Sandler O’Neill calculated in a research note on Thursday.

On that basis, Sandler O’Neill estimates the combined entity will have a price-earnings multiple of 9.2.

Rival Blackstone Group (BX.N) commands a multiple of 13 times earnings while Fortress Investment Group (FIG.N) is currently trading at about 8.5 times, Sandler O’Neill said.

Private equity firm Kohlberg Kravis Roberts & Co announced plans on Wednesday to merge into its Amsterdam-listed fund, KKR Private Equity Investors LP (KKR.AS) (KPE). However, no valuation was put on the proposed deal by KKR.

Analyst Michael Kim calculates an implied market for the combined entity of $3.9 billion, which he bases on KPE’s closing price of $5.70 on Wednesday.

“As such, we think KPE is about fairly valued at current levels,” said analyst Michael Kim in the research note. He raised his target on the stock to $6 from $3.50, roughly 10 times his 2010 proforma earnings estimate per share of 62 cents.

Sandler O’Neill calculated the earnings under a measure called “economic net income” which is how rival Blackstone reports.

Price-earnings multiples give investors a measure of how expensive a stock is relative to its earnings power. (Reporting by Megan Davies; editing by Matthew Lewis)