The collapse of the Kenya Shilling is making the agricultural stocks look greener more than ever before.

Despite the associated rise in inputs (eg fuel, fertiliser etc), the depreciation of the Ksh by a factor of almost 30% ytd to the dollar is bound to positively impact the revenue of agriculturals.

In addition, the agriculturals have for a long time been trading at ridiculously low P/Es (some at below 2).

My main focus for the agriculturals is Williamson Tea because of the following:

1. The international tea prices have been on a consistent sharp upward trajectory since 2005 to now.($2 per kg in 2005 vs current year average of about $3 per kg).
2. The depreciation of the Ksh vs US dollar will most probably continue into 2012 (election year associated with economic paralysis as focus on politics takes center stage and political risk premium on investment rises).
3. Williamson is trading at P/E OF 1.9!!! For the past two years, it has returned an EPS of abt Ksh 96-97 with a rising dividend payment (currently trading at a dividend yield of over 8%).
4. The company is sitting on a huge Revenue reserve (as at 31st March 2011, the revenue reserve was Ksh 440 per share consisting of Ksh 108 biological assets and Ksh 332 as cash and cash equivalent)
5. At such huge revenue reserves, the company should ideally increase dividend payments to share holders as accumulating any further reserves does not make economic sense unless a land purchase/substantial investment is in the offing.

A further rise in dividend payment should raise the P/E of this company to a more realistic level of about 4, which would mean a substancial rise in share price.

The illiquidity of the share is however a disadvantage for short term traders but may be of benefit should long term investors set their eyes on it as the share has very limited shares on offer (only about 8.7 M shares issued of which almost 3/4 are held firmly and not for sale)

Happy hunting.

Good points All. Mr Rich (one of their top 10 shareholders) never ceases to complain about the perceived stinginess towards shareholders of WTK KAPCH, noting they are owned by the same . Could these negate some of the feel good factors?

On the other hand between WTK and KAPCH, which company has a longer track record of better returns?

KAPCH is a subsidiary of WTK, hence you are better off with the parent company (WTK). Also, WTK seems to have greater price stability and is more capitalised.

Happy hunting.

@stockmaster - yap, agri counters have been spared the heat by Mr. Market this year. And yes their P/E's have been ridiculously low for too long. Apart from the earnings, I see more of a real estate pricing not yet factored... Once this is unlocked you can imagine the price explosion...

http://af.reuters.com/ar...s/idAFL5E7LC0GL20111012

Agricultural firms are going to make huge exchange gains for sure.

Williamson Tea sold its headquarters for Ksh 500M and will be paying the procceds of the sale to shareholders as a special dividend. With only about 8.76M shares, if the whole amount is split, thats about Ksh 57 per share.......Add dividend for the year that should be at least in the +20 Kenya Shilling region (EPS should be +100 Kenya Shilling per share).............you realise once the rally starts, a share split will be a necessity.

I ain't pumping the share but Ksh 300 would still be cheap for Williamson Tea based on the above info.

Happy hunting.

Perfect Timing. Once Again.
Curious though as to why you didn't make a play for it on the
'Playing The Market 2011'
Once again. Noma!

"Proceeds from the transaction are expected to be paid out to shareholders in the form of a special dividend in the current financial year", said managing director of Williamson Tea, Alan Carmichael.

They wont pay the full amount as dividend thats for sure. Last financial year dividend was 12.50. so 20.00 bob dividend, with 8.00 as the special would sound about right.

Thanks @Aguytrying. You can tell I am not too happy with KPLC.

As for my reduced activity on Wazua, there has not been much happening on the NSE and hence I decided to concentrate my day trading activities in other markets.

I expect to repatriate a chunk of funds some time towards the elections next year.

I continue to hold onto my Agrics however along with some other positions which went underwater despite SOLID fundamentals.