Float a Key2 strategy

THERE may yet be a bright side to the fortunes of battered and bruised shareholders in Perth Internet company Chrome Global.

Earlier this year the company changed its name to Key2 Limited after it acquired an interest in Key2 Rental Management.

Via the backdoor listing of the property manager, the Chrome Global directors hope to raise $2.2 million through the offer of 11,000,000, 20-cent shares. As part of the deal it will shed its public relations firms, which it acquired only in April last year.

Sponsored by Montagu Stockbrokers Pty Ltd the funds raised are to be used to bankroll further business expansions. Existing Chrome Global shareholders will maintain a significant interest in the newly named firm when it lists on an expected market capitalisation of around $9.2 million.

Key2 chairman Ananda Kathiravelu said the business was relying on a property management aggregation business model similar to that being used by childcare centre operators.

The Western Australian firm plans to expand nationally by buying rent rolls from real estate firms.

“Like the childcare centre aggregation model, we aim to achieve better margins through improved systems, increased resources and economies of scale,” Mr Kathiravelu said.

The Key2 business already has a rent roll of about 1,500 investment properties with a combined asset value of more than $225 million, through the acquisition of seven Perth rent rolls.

The company hopes to close the offer by April 28 and list on May 18.

Key2 aims to develop operations in Sydney, Melbourne and Brisbane with the company targeting the aggregation of 3,000 properties in each of the regions for a total of 12,000 properties under management.

Chrome Global was listed on the ASX in December 1999 as an information technology and web design business but quickly ran into trouble. In April 2002 it acquired two public relations firms PPR (WA) Pty Ltd and RHK.

On December 16 the company entered an agreement to sell PPR to Blueregal Corporation Pty Ltd. Blueregal is effectively foregoing the rights to 1,200,000 shares in Key2, worth $240,000, which was the amount paid for the public relations firms a year ago.

The Key2 business, which has been operating since September 2001, is operating in a competitive industry.

There are an estimated 5,000 small businesses involved in property management.

“There is no dominant national player in this emerging industry sector. Key2 is now well placed to consolidate its position in WA and expand nationally,” Mr Kathiravelu said.

“This industry provides similar if not better opportunities than have been witnessed with recent aggregation of childcare centres across Australia.

“The sheer size of the property management market and its growth opportunities are demonstrated by the fact that property is still the preferred investment choice of most Australians, with over one million investment properties across the country.

Montagu Stockbrokers’ Mark Maine said Key2 provided a good investment opportunity.

“Unlike some aggregation businesses, Key2 has the added benefit of contracted and diversified income streams,” he said.

“Companies like Key2 provide investors with opportunities to invest in new, emerging businesses that have established a base level of earnings.”