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Total Q3 results point to a rosy outlook for KK
Rank: Elder Joined: 6/2/2008 Posts: 1,438
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Results published this morning.
Q3 Cumulative Net Sales up 143%
Q3 Cumulative Operating Profits up 110%
Q3 Cumulative Net Profits = Kshs 348,597,000 (up 52.89%)
Q3 Cumulative EPS - Kshs 1.17 (down 10%)
Q3 EPS (for 3rd Qtr only) = Kshs 0.26
Qtr on Qtr growth - Minus 51.72%
I have focused primarily on EPS being my possible take home and they are disappointing, in my opinion.
The only positive I can draw from these results is that cash generated from operations has risen almost 4-fold from Kshs 624 million to 2.357 billion.
All the same Total shareholders are a hardy lot. I don't expect much of a change in price. It hardly ever moves!
What do y'all say?
In my view the growth in the figures for sales, Gross Profit and Operating Profits portend a good set of results for KK.
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Rank: Elder Joined: 11/27/2007 Posts: 3,604
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the results were out yesterday and not today. check today's DN page 33 (nrb edition) African parents don't know how to say sorry.. the closest you will get to a sorry is a 'have you eaten'
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Rank: Elder Joined: 6/2/2008 Posts: 1,438
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Sober wrote:the results were out yesterday and not today. check today's DN page 33 (nrb edition) Thanks for the correction. I will edit my post accordingly. Any other comment?
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Rank: Member Joined: 1/15/2010 Posts: 625
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Rank: Elder Joined: 11/27/2007 Posts: 3,604
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mwanahisa wrote:Sober wrote:the results were out yesterday and not today. check today's DN page 33 (nrb edition) Thanks for the correction. I will edit my post accordingly. Any other comment? this counter is the most consistent on the bourse. trades between 29.00 and 33.00 when books close. i always try to fot in, buy at the lowest and sell just before the books close, they also pay oneof the highest dividends. African parents don't know how to say sorry.. the closest you will get to a sorry is a 'have you eaten'
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Rank: Elder Joined: 6/2/2008 Posts: 1,438
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Sober wrote:mwanahisa wrote:Sober wrote:the results were out yesterday and not today. check today's DN page 33 (nrb edition) Thanks for the correction. I will edit my post accordingly. Any other comment? this counter is the most consistent on the bourse. trades between 29.00 and 33.00 when books close. i always try to fot in, buy at the lowest and sell just before the books close, they also pay oneof the highest dividends. Nice strategy but your gains are capped at less than 20%. Dividend yield at Kshs 1 is now about 3% at a price of 30. With the huge debt to service over the next few years, I do not expect the Kshs 2.50 dividend to resume anytime soon. The only silver lining that I see is the funds they may get from the sale of some of the service stations. This could bump it up some.
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Rank: Veteran Joined: 6/17/2009 Posts: 1,622
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@mwanahisa,my EPS come to 1.98 against 1.72 at half year,which still shows .26 EPS for third quarter.The question is whatever caused the slow down in Total during the quarter also affected KK.Half year KK made .88 per share.Giving it the same third quarter performance to Total and in direct proportionality (a too conservative approach)the EPS drop to .13 for the three months and total earnings of 1.01 at third quarter.Throw in a good fourth quarter,KKs regional reach and a management which i like and full year EPS at around kSh 1.40 is possible.Where is your money?
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Rank: Elder Joined: 7/21/2010 Posts: 6,192 Location: nairobi
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What tussle was total involved in, to compare it with kk? "Don't let the fear of losing be greater than the excitement of winning."
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Rank: Member Joined: 4/25/2008 Posts: 192 Location: Nairobi
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@ mwanahisa "In my view the growth in the figures for sales, Gross Profit and Operating Profits portend a good set of results for KK." The increase in TKL profits was largely due to an increase in retail network coverage (where margins are better) from take over of Chevron business. 1. What take over has KK been involved in to justify your outlook? 2. Do you think that the KPRL award will afffect KK's profit? 3. Recently, KRA has made it almost impossible to obtain an extension of transit product. Do you think that this will drive up the costs and reduce profitability? Itari muting'oe ihuragwo ngi ni Ngai
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Rank: Elder Joined: 6/2/2008 Posts: 1,438
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mlennyma wrote:What tussle was total involved in, to compare it with kk? Admittedly, Total was not involved in a tussle with Govt, while KK was. That's why KK's price is at 11 rather than 15. The reason why I have made my inference is that both are in the same industry hence there's a high likelihood that if sales are growing at Total, they are also growing at KK. KK has been a lot more profitable for every shilling in sales relative to Total. Hence even though KK may have suffered a hit in Q3 in Kenyan sales, KK will most likely make up for this in Q4. If we assume that KK makes ZERO profits for H2 2010 while Total continues at its current pace, we have Total trading at a forward PE of 19.59 while KK is at 13.9. Where would you rather be?
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Rank: Elder Joined: 5/27/2008 Posts: 3,760
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1. What take over has KK been involved in to justify your outlook?
KK has been expanding regionally, spreads the risks, the margins are possibly better in the other territories.
2. Do you think that the KPRL award will afffect KK's profit?
The matching principle dictates that revenue is matched against the expenses incurred to generate it. The award goes back several years, so I'm not sure whether they will treat the payment to KPRL as a hit in this year or spread it over several years.
3. Recently, KRA has made it almost impossible to obtain an extension of transit product. Do you think that this will drive up the costs and reduce profitability?
I don't understand this comment. Suffice to say KK uses Dar extensively, so the transit cargo restrictions here shouldn't be overly significant.
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Rank: Member Joined: 4/25/2008 Posts: 192 Location: Nairobi
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@ Gordon Gekko Am very cautious for the following reasons. From last years accounts, the Kenyan operation accounted for about 60% of th etotal profit. Consequently, unless this unit's profits increases the total group prifits will not increase materially. KK has assumed that they are not supposed to pay KPRL hence they did not factor that cost in prior years accounts. This will mean that this year cost will rise by the value of the payment to KPRL. To explain my third point. KRA normally grants 30 days within which product imported in transit to other countries should be exported. In case one has been unable to export, KRA can grant an extension. However, in the past two weeks or so they have been isssuing directives to oil marketers that make this impossible. Granted that KK use Dar extensively, but the Uganda subsidiary which remains their biggest subsidiary can only be served from Mombasa. This will mean that either KK reduce the volume imported for Uganda and risk stock outs and lower profits or import product as before but risk penalties incase exportation is not done on time. Itari muting'oe ihuragwo ngi ni Ngai
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Rank: Elder Joined: 6/2/2008 Posts: 1,438
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milken wrote:@ Gordon Gekko
Am very cautious for the following reasons.
From last years accounts, the Kenyan operation accounted for about 60% of th etotal profit. Consequently, unless this unit's profits increases the total group prifits will not increase materially.
KK has assumed that they are not supposed to pay KPRL hence they did not factor that cost in prior years accounts. This will mean that this year cost will rise by the value of the payment to KPRL.
To explain my third point. KRA normally grants 30 days within which product imported in transit to other countries should be exported. In case one has been unable to export, KRA can grant an extension. However, in the past two weeks or so they have been isssuing directives to oil marketers that make this impossible.
Granted that KK use Dar extensively, but the Uganda subsidiary which remains their biggest subsidiary can only be served from Mombasa. This will mean that either KK reduce the volume imported for Uganda and risk stock outs and lower profits or import product as before but risk penalties incase exportation is not done on time.
KK is trading at a discount for precisely the first two reasons you have cited. I believe KRA is applying the same rule across the board. That being so any costs will be added on to the final product price in Uganda. While this could dampen demand slightly, petroleum demand is fairly inelastic, so Ugandans will just have to grin and bear it.
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Rank: Elder Joined: 6/2/2008 Posts: 1,438
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@milken. What makes you believe that Uganda can only be served from Mombasa?
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Rank: Chief Joined: 1/3/2007 Posts: 18,259 Location: Nairobi
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I feel like a proud father who sees his kids excel... At times I felt 'alone' in defending KK... but now I am in an enlightened & growing group... Some might call a cult! Long Story Short... KK will make the believers good money! Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
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Rank: Member Joined: 4/25/2008 Posts: 192 Location: Nairobi
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@mwanahisa 1.A quick look at an East Africa Map will explain that moving product from Dar to KLA is twice as long as moving product from MSA to KLA. The fact that Ug product is moved by pipeline to Nakuru, Eld or Kisumu makes Tanzania five days longer. 2.Ugandan market is very unstructured and ill regulated with a myriad of small operators who can be able to obtain small quantities for their stations from the small oil companies in Kenya. Though not operating in cohorts, they will eat in to KK market share especially when they have stock outs. Though unrelated to our discussion, It is my view that KK and TKL are good only in the short run but five years down with Ug producing its own oil we in for a very big re-allignment. Itari muting'oe ihuragwo ngi ni Ngai
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Rank: Elder Joined: 5/27/2008 Posts: 3,760
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@milken, when Ug begin producing, KK will just source from them and not ADNOC or wherever they currently source from. So how can KK lose?
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Rank: Elder Joined: 6/2/2008 Posts: 1,438
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milken wrote:@mwanahisa
1.A quick look at an East Africa Map will explain that moving product from Dar to KLA is twice as long as moving product from MSA to KLA. The fact that Ug product is moved by pipeline to Nakuru, Eld or Kisumu makes Tanzania five days longer.
2.Ugandan market is very unstructured and ill regulated with a myriad of small operators who can be able to obtain small quantities for their stations from the small oil companies in Kenya. Though not operating in cohorts, they will eat in to KK market share especially when they have stock outs.
Though unrelated to our discussion, It is my view that KK and TKL are good only in the short run but five years down with Ug producing its own oil we in for a very big re-allignment. I am aware that it is a shorter distance from Mombasa to Kampala than from Dar. Nonetheless, the pipeline is not able to transport all the requirements for Kenya and Uganda. Hence a large chunk of oil is ferried by road. I presume that it is cheaper to transport product even by road to Uganda via Kenya than via TZ. There will however be circumstances where TZ is a better option e.g. during the PEV in early 2008. I have just looked at KK's 2009 annual report and Segman wrote this: "Tnazania continued to play its crucial role in the Distribution channels to Rwanda, Uganda, DRC (Eastern and Lubumbashi areas) and Zambia." So KK does use TZ to ferry some of their product into Uganda and I bet they have a good reason for it. As for the oil discovery in Uganda, there will still be need for downstream marketers. In any case, Uganda will probably be 1 of more than a dozen territories in which KK will be operating in by then.
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Rank: Member Joined: 4/25/2008 Posts: 192 Location: Nairobi
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@Gordon Gekko when Ug begin producing, KK will just source from them and not ADNOC or wherever they currently source from. So how can KK lose? Why KK and other Kenyan companies are able to export to Uganda, Rwanda, DRC etc is because the product most comes from Kenya and foreign companies can not use the Kenyan pipeline. When the equation changes and product comes Ug all the companies in RW, DRC and Burundi will source the products from Ug on their own account. @mwanahisa BTW It is illegal to move petroleum products other that Fuel oil by road from Mombasa. Well some companies have exemptions bu the cost (about Kes1.5per litre more) is untenable. I admit that there are supply challenges within the KPC system, however there has never been a challenge in moving products by road from Nairobi. Hence Kenya will always be better that TZ even with PEV. Segman is giving the shareholders hogwash by saying that product can move by road from TZ to UG. As a matter of fact even for Rwanda the government had to intervene and levy higher taxes on product from Kenya to encourage guys to go to Dar and establish another supply route. With the new budget in June moving petroleum taxes to specific from ad valorem, Rwanda customers have started trooping back to Kenya. In Burundi, Dar is still advantageous owing to a dubious tax structure that favors product from TZ. (By the way I wonder what our Ministry of Trade does. I tried to meet the Kenyan trade attache to Rwanda over this issue and he was very unhelpful) Itari muting'oe ihuragwo ngi ni Ngai
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Rank: Elder Joined: 6/2/2008 Posts: 1,438
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@milken, Tell us more. You seem to be very much in the loop, so I will definitely appreciate more information. As for now, I can only quote what is in the public domain, unless I have evidence to the contrary.
Kobil Uganda, Kobil Rwanda, Kobil Burundi are registered entities in those countries. There will be no reason for them not to be allowed to do business in Uganda or to import from there. Or are you saying only Nationals will be allowed to operate in Uganda as well as in neighbouring countries?
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