Avoid Mumias stock but buy or hold Unga

Mumias Sugar: On Thursday last week, Mumias stock leapt to Sh2.70 apiece from Sh2.50 per share, with a high of 10 per cent gain at Sh2.75 per share.

According to Chambua Ogoti, a securities analyst, the surge followed a successful effort by the government to secure a one-year Comesa extension.

“This seemed like a relief on the counter, which is currently laden with liabilities.”

On Friday, though, the company took a nose dive. After opening the market at Sh2.80 per share, the stock quickly tumbled by 12.96 per cent to Sh2.35.

The free fall came hot on the heels of the miller’s half year results, in which the firm suffered Sh2.08 billion half-year loss.

This was a bigger loss compared to the Sh407.4 million hit sustained a year earlier.

Net revenues for the half-year ended December 2014 fell by 62 per cent to Sh2.67 billion, the firm said.

SURGING PROFITS

Mumias attributed the huge loss to the closure of its factory last November for maintenance, illegal sugar imports, low sugar output, low prices and high production costs.

“These results indicate a greater degree of rot that the company is suffering from. It is fundamentally very fragile, and the half-year results will further push it downwards,” says Mr Ogoti.

But the company sees a better second half. “The company looks to better performance in the second half of the year following the resumption of production,” said Mumias.

Mr. Ogoti, though, sees it differently. “Unless strict restructuring is done on the firm, losses will continue to stream in. At the moment, this is the counter to avoid,” he notes.

Unga Group: This stock is recommended as a Buy.

In its half-year financial results released a few days ago, Unga Group reported a 59 per cent growth in half-year pre-tax profit.

In the six months ended December 2014, the flour miller’s profit before tax surged to Sh527.2 million from Sh330.7 million recorded in a similar period a year ago.

“Although the miller did not offer a dividend, its earnings per share improved to Sh3.41 from Sh1.96,” says Mr Ogoti. Unga’s turnover went up by Sh900 million to stand at Sh9.7 billion while operating profit grew by Sh116.3 million from Sh293.5 million realised in a previous accounting period.

NEW ACQUISITION

According to Ndindi Nyoro, the head of Investax Capital, Unga’s growth was attributed to its sale of a 51 per cent stake in packaging firm, Bullpark, which gave it Sh335 million. 

The company has also installed a new wheat mill which contributed to high output, resulting in increased revenue,” he says.

On Friday, Unga opened at Sh48 per share after closing at Sh46.75 per share on the previous day.

The counter has touched a low of Sh22 per share and a high of Sh56.50 apiece. Mr Ogoti adds that Unga’s diversification through its new acquisition Ennsvalley Bakery is a big plus to the counter. “Unga will be rising in the medium-term.

It is a Buy for those yet to take position and a Hold for those already in it,” he notes.

Bamburi Cement and Carbacid: Shareholders of Bamburi Cement are set to pocket Sh12 per share in dividend following improved financial performance that saw the cement maker post Sh3.9 billion net profit from Sh3.6 billion net profit recorded a year earlier.

This is a nine per cent improvement from last year’s Sh11 per share dividend.

On the opposite extreme, Carbacid shareholders will be coming to terms with the company’s half-year, 6 per cent drop in net profit to Sh221.2 million.

The two companies are trading at Sh159 per share and Sh24 per share respectively.