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Thursday, September 07, 2006

Mumias 2005-6 Results are, well, Sweet...

Mumias Sugar Announces 2005/6 Results

I was unable to find their website. The Standard

Details from Mumias Press Release

Gross Turnover: KShs 14 Billion +14%
Net Turnover: KShs 11.6 Billion +14%
Operating Profit: KShs 2.1 Billion + 14.5%
Profit Before Tax: KShs 2.2 Billion +20%
Profit After Tax: KShs 1.53 Billion +18%
Earnings Per Share: KShs 2.99 +18%
Dividend Per Share: KShs 1.75 +17%

Management is cautiously optimistic about 2006/7 & beyond given:
  • Lower world sugar prices compared to 2004-5
  • Stiffer local competition
  • New venture - electricity co-generation for sale
  • New venture - Alcohol production
  • Higher efficiencies through better management of operations
  • Capacity enhancement (Expansion & Modernisation)
  • Increased local demand to 1.2 Million tonnes by 2010
  • Sugar levy (on farmers) which makes imports a larger threat
The government is expected to dispose of 91,999,220 shares (18.04%) by Dec 31 2006. This is a huge PLUS since it decreases government interference.

Opinion
2006-7 will be much better given the recent rains starting in April 2006 which will enable higher & better quality cane production thus higher extraction rates.

2007 might see a world sugar deficit since Brazil has upped its ethanol production, Europe is reducing its production of sugar beets & China has become a net importer of sugar. This would lead to higher prices thus reducing competition from imports into Kenya.

Mumias' price (60/- on 8 Sep 2006) is NOT cheap! Current P/E is 20x which is higher than other well run firms e.g. BBK, KQ, etc.

Reduction in government ownsership os a huge PLUS since it decreases government interference. I hope the govt uses the funds to improve the INFRASTRUCTURE in Mumias' sugarcane growing regions!

I expect the shares to be sold at 50/- (approx 20% discount) to the prevailing price.

13 comments:

Ig-know-rant said...

I like this company's fundamentals and their long term plans. This electricity generation business is serious. And they have alot more capacity with the sugar they are crushing. And those sugar cane fields are potential farms for growing jatropha.

bankelele said...

I'm still worried about the ban on duty-free sugar from the COMESA region which will be lifted in 2008. Also does the MD plan to contest in the 2007 elections?

kenyanentrepreneur said...

ig-know-rant:

What are the companies "fundamentals"?

coldtusker said...

KE - I have posted their results (as available) for 2005-6.

I will PREDICT - ceteris paribus - that Mumias profits will increase in 2006-7 primarily due to better rains since July 2006 in Mumias' sugarcane regions.

I hope after reviewing the Annual Report & their future plans esp energy production will enable a better prediction!

BTW, this is a firm whose shares are fairly liquid with a wide ownership thus I would like see you pick this firm as a "test case" for your charts.

kenyanentrepreneur said...

CT:

How do you know that those results you posted are accurate? i'm sure you've heard of Enron - they had all kinds of good numbers they were throwing around.

If part of your "fundamentals" involve waiting for the long rains....then you are in trouble for the long haul (but you are also truly an african at heart!)

Also, what does "wide ownership" have to do with the volatility of the stock price? explain that to me, sir.

Now, I'm sure if mumias goes up, you'll be hollering here about how "right" you were and if you are you'll say that you were only giving PREDICTIONS afterall. So, I can't win on this board (sigh)

Kenyanentrepreneur.blogspot.com

kenyanentrepreneur said...
This comment has been removed by a blog administrator.
bankelele said...

KE: You must overcome this idea that every company is an Enron and I fail to see how you can draw comparions from Enron to Mumias Sugar Company.

Enron collapsed and is gone, there are still thousands of companies on the American stock exchanges. Yes they use some legal loopholes to enhance EPS and their stock prices, but that does not alter their fundamental or stop people investing in them.

coldtusker said...

KE - The sigh was a nice touch!

You imply that I think the price will rise... Where have I said or implied that?

IMHO 60/- is overpriced for now (until the gov't sells its 18%). I still expect profits to rise in 2006-7. I will be in a better position AFTER I read the Annual Report.

Rains (2006-7) beats the drought (2005-6).

Profits & share prices often are NOT in sync thus the ability for the savvy investor to take advantage of what they think is "undervalued"...

Warren Buffett style... BUY when others are fearful, be VERY fearful when other are buying!

nelie said...

KE
Your pessimism is starting to wear me out! Am not advocating for a perpetual honky dory attitude but you are being too negative and dampening spirits.
Wide ownership - the more supply there is in a good stock, the wider the price swings. Some guy out there that needs to pay school fees will cash in his chips at whatever price just to make that opening day.

kenyanentrepreneur said...

bankelele:
This is the reason I keep bringing up Enron. A company of that size managed to collapes in a country that has a mature system of laws and a mature stock exchange. So, I suppose I don't understand why you seem to trust the info coming out of companies in kenya, a country that doesn't have a mature system of laws or a mature stock exchange?

Optimism is good, but it needs to be tempered with a realistic understanding of the facts on the ground.

but, but, but....I don't want to dampen your spirits. I want nelie to be happy (I really do)

cheers

Kudrinketh said...

KE
I'm about as tired of your constant dissing of NSE as everyone else here.

Let go of the Enron analogy,simple knowledge of statistics will tell you that it's collapse is not representative of the thousands of listed companies in the US, so please drop that tired line.

Are you aware that unlike US, the CMA requires at least 5 yrs of profitability before listing.Now that has its pros and cons, but one undisputable pro is that you get tried and tested companies listed.

I've heard you dismiss NSE as made up of penny stocks their prices are quivalent to US pennies! that's just ridiculous.By that token,we'd say that US stocks are worth half their values relative to Cyproit pound(1 US$=2.2 cyproit pound). Or that if we dolarised our economy, our stocks will be that more valuable!

If this currency concept is too complex for you to deciper,maybe you can concider using the Hamburger Standard http://www.oanda.com/products/bigmac/bigmac.shtml

coldtusker said...

@ig - LT plans are great & feasible. Since its private, Mumias has moved fast to implement the projects.

@bank - Dutyfree sugar remains an issue BUT Kenya might make the case that subsidies lower prices in Sudan or Malawi thus extend the "ban"

@kudri - Market is going nutz. I expect a crash (no idea when!) coz prices are too high for most counters.

Anonymous said...

Hi guys,
It is nice to hear how things have changed over the years and how we can even be able TODAY here in Africa to predict how a company will perform within the next 10 or so years to come.

Mumias Sugar has been on an upward trajectory and that has been good for the long haul as investors are assured of good returns. We must pay tribute to the CEO, Dr. Evans Kidero who is among one of the few indigineous people who have steered local companies to such a great heights of profitability and prosperity.

For me I think Mumias is destined for greater things under Kidero's watch and what we are about to see will be an evolution of a small profitless company to higher profit minting machine. Look with electricity production and plans to go into ethanol also in top gear, you can not underestimate the powerhouse that the Company will evolve into.

Ek, as he is fondly known doesn't have to tell anyone whether he is going into politics next year or 2012 or whenever coz what is important as of now is steering Mumias into a global giant which am sure he is certainly going to do.

Lets support the man.

James Onyango
NAIROBI, KENYA