This was sent to SIB clients.
C/p
Dear Client,
>Following announcement of 1H12 results (3 February) we update our valuation on Mumias Sugar Company Limited (Mumias). While 1H12 performance showed weak top line growth, we see this as temporary and expect volume of cane crushed & sugar produced to grow over our forecast period. In our view, outlook for Mumias remains positive mainly because of; ability to pass-on cost of high cane prices, expected rise in cane quality due to increased investment in cane development & supply of quality inputs to out-growers, rise in sale of branded sugar and scope to reduce distribution costs by encouraging self-collection of sugar by distributors. Our key concerns are; over-dependence on out-growers, government’s influence in setting cane prices, rise in working capital requirement (driven by increased need to fund farmers) and removal of COMESA import safe-guards in 2014.
>We retain our BUY recommendation on Mumias. However based on our adjusted forecasts, we revise our fair value estimate to KES 8.04 (60.8% upside).
Please refer to the attachment for the detailed report and financials.
Best Regards,
Research Department | Standard Investment Bank Ltd
Switchboard : (254) 20 2220225 | 16th Floor - ICEA Building - Kenyatta Avenue
Call Centre : (254) 20 2228963
www.sib.co.ke | PO Box 13714-00800 | Nairobi | Kenya
Wisdom to detect when share prices hit rock bottom.
When interest on bonds keep going up, you know the bear run is on high street. When interest on bonds start leveling, the bear has met the bull and they have hit rock bottom. When the interest rates on bonds start coming down, the bull has overpowered the bear and you better be riding the bull.