This market is slowly turning, prices are no longer falling as strongly as they were a couple of weeks ago. The trigger could very well be the full year results that will reveal corporate Kenya is pumping, however the trick will be identifying the companies where the fundamentals are right. In my books these will include, strong consistent management teams, dominant market positions, companies with access to the retail sectors and finally those with a REAL growth strategy. This economy continues to offer adventurous corporates at reasonably acceptable risk levels new revenue streams. I expect the economy to continue to grow strongly thanks in a large part to higher government spending. AND it is not about more money but about greater government efficiency allowing it to expand capital expenditure which was previously never spent. The donors will also come round and become enthusiastic supporters of the budget.
Mumias announced the first half of the year was terrible, thanks to poor rainfall. This highlights the underestimated sensitivity to weather for Mumias. I also noticed that bad debt provisions are well in excess of Sh.150mn pa - this is way to high! All thanks to farmers who do not pay back loans extended for farming inputs. Mumias management should talk to Government to get them to take on this financing risk as its a social activity to maintain welfare. Over the medium term the healing balm will be the TARDA project that should reduce this sensitivity by increasing use of plantation irrigated farming. Just hope they have the Sh.24bn required without raising further equity. The market has however continued to push the price lower a fat window of opportunity is opening up and you should get read to load up.
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