Way back in Feb 07 I argued here that Mumias was starting to look attractive based on continued market protection. Today I now know that the market protection is slowly being stripped away and as local sugar prices are at least 50% higher than the cheapest producers in COMESA there is cause for concern. I expect domestic prices to come under pressure as from next year as ever higher sugar imports flood the domestic market. Local producers will be hard pressed to prove their relevance BUT its not the factories I'm referring to, rather it is the sugarcane farmers. If cane cannot be produced at lower prices then there will be difficult times ahead for the sugar belt.
However there may be some good news in store. This past week a Nation article revealed that NEMA had finally approved the proposed $350mn+ sugar plant in the Tana River Delta. According to the article the plant would take 2 year to construct and the related revenues should come through thereafter. This is a particularly important development 'coz the plant could be up and running a full year before quota restrictions on imports of duty free sugar from COMESA states are lifted in Mar 2012. It is time to start reviewing the Mumias stock, I think its future cashflows have just received the lift it requires.
Importantly it is critical to remember this company is a sitting duck for a takeover.
