It's difficult to 'predict' share prices coz of multiple variables both at the onset & during 2010 BUT I will discuss/reveal my favourites.

I may change my selections or price targets based on news during the year.

The list documents my selections & I can study why or what I did right or wrong.

Additional details/reasons/analysis will follow.

Price targets are my exit points any time during the year. These may be revised as well.

KQ - Strong growth in destinations in 2009 & hopefully these translate into profits in 2010. The expensive hedges are burning off.

Price target 43/- (current 35.75)

KPLC - Rains should boost hydropower which is cheaper for the public. The aggressive procurement of thermal power means KPLC has something to sell even if the drought continues.
The restructuring is worrisome as current shareholdering may be diluted.

Price target: Tough to say but I think 200/- including Rights premium (current 141/-). I might have to wait for 2010-11 results for this price.

Williamson: Great profits coming in 2010. Can they sustain the profits into 2011?

Price target 200/- (Current 149/-)

@thedeal - LOL...

I think/hope KPLC will do well in 2010 but the true earnings boost will show up in 2011.

I will add more flesh (the whys) to my picks later but KPLC now has the electricity to sell.

I read the Annual Report cover to cover & they faced 'suppressed demand' in 2008-9 which essentially meant KPLC could not supply all the demand out there hence the rationing. KPLC can't charge more thus D > S (fixed supply curve with fixed pricing)

Since June 2009, other thermal producers have come online adding capacity meaning higher unit sales in 2010.

KPLC has high fixed costs & needs to sell more electricity units to make money. It has the units now. Of course, the drought could hurt since hydropower remains the most important source.

Add the pre-paid meters (teething problems in 2009-10) but eventually (like safaricom) a 'cash' generator.

This means KPLC doesn't have to collect AFTER the usage. More efficient & lower defaults. Less need for collection staff, handling of chqs/cash, etc.

@sparkly - It is unlikely that KPLC will see a similar jump in profits in 2010 (cf 2009) but even if it maintains similar profit levels in 2010, it looks cheap.

Anyway, I like these less exciting stocks... with moats! Sorta Warren Buffett pick. A monopoly with certain pricing power (in this case fixed) which can offload uncompensated risk (forex + diesel price risk).

BTW, WB loves energy stocks.

@VVS,
Utility stocks are money makers the world over and i agree.KPLC is no exception despite it's inefficieny.Don't blame Buffet...lol.

@vvs my memory is a bit rusty but i think 5 years ago KPLC traded at 9 sh. In true buffetian fashion the stock has returned a tidy sum for investors. Now GOK wants to harvest its investment in the company. We can only guess what will happen afterwards.Just saying if you buy into KPLC in 2010, you must be ready to be in it for the long haul.

Hydropower contributes the BULK (& cheapest) of electricity in Kenya. 75% thermal generation would mean 50-100% rise in cost of electricity which DOES reduce usage for residential or commercial or industrial. Not good for KPLC or consumers.




Fixed costs will rise but the marginal cost to connect each new consumer is not as high (except for rural areas) since once you have power poles in place along a street, connecting more consumers is 'cheaper'.

So what if Fixed Costs rise? As long as 'new' consumers use the product helping offset the cost.

I admit the conversion is the scary bit. Until we find out more... we are flying in the dark.

Nevertheless, I have read the Annual Report cover to cover and there is a hidden gem that makes me optimistic. Now the gains I want may not surface in 2010 but I am patient to wait till 2011.

I am OK with long term. My goal is 200/- (plus dividends). Looking at current price (143/-) that is 57/- capital gains + 8/- dividend. I can live with that!

The darlings of the market in 2010 will be ARM, SCANGRP, MSC, HF and SFCOM. They will set the tempo of the market.

@njunge, You would bet that investors would be apprehensive but NO! The counter has already jumped sh 13 in 2 days. Our market is not rational.

my take would be EABL, KQ and KCB