Thursday, January 04, 2007

Here are a couple of stocks i'll watch in 2007 and why.

1. BAT
This company will surprise us with the growth in the export business.Exports have risen to more than 40% of revenue.
The Anti smoking Legislation will make it harder for new competitiors to get into its market.i.e. the cost of doing Tobacco business will rise
I also like its dividend yield at >people tend to forget the other side of investment gains is dividends Not only capital gains.

On the other hand, the market may well ignore it.At sh190- sh200 its too expensive for the average retail investor.

2. Equity
Going by the latest half year and quarterly results Earnings will double.The only darkside is the rising Non Performing assets.The performance is beyond the 40-60% earnings rise predicted by the management during the NSE listing.

It has good management and it still isnt all over the country.

3. KENGEN
I hope all those retail investors who bought start cashing out soon so that i can get in at a nice price i.e. under sh.26.

Its well run.The only problem is that its under the State Corporations Act meaning that a new Government in 2008 will lead to changes in the management

4. TOTAL
I expect earnings to decline but management may retain dividend payout at sh2.50 or Sh2.00.I'll increase the stake coz i love the dividend yield.
I dont know how the energy bill will affect the Oil sector.Will let u know once, i read it.

5. Standard Group
Perennial laggard but has impressive assets i.e. KTN Tv and the Newspaper distribution service.This is a company crying out for a takeover and management turnaround.
I will buy it speculatively,since i'm sure that in the next 18months somebody will make a bid for it.
I hope they set up an investor section on their website like Nation Media group.Otherwise, how will potential investors get financial information on the Group?

I only buy companies that are doing well/well managed in their sector and have room for long term growth(i dont worry too much about the share price as long as the P/E isnt too high).




30 comments:

ken said...

Happy new year Pesa Tu.
I think this being election year, Standard and Nation stocks should show some improved revenue, due to the extra attention in the campaign and all the extra revenue politicians bring in the advertising business.

Apart from Equity whats your take on the finance sector, specifically all this banks now jumping into the microfinance and small loans bandwagon ?

The industrial sector looks wierd and the cement companies dont seem to be so promising despite the real estate and housing booms in the region.

Riba Capital said...

Pesa: Standard Group is already in my portfolio; and they have good things to come e.g bonus, movement from AIMS to MIMS, back into profitability.
This is a good buy.

Enjoy the new year.

Can you guess what the stock exchange prices were in 1980?? or the Forex Rates??

J K said...

Pesa tu, as it should be, I can see from your analysis that you are not a punter, you base your Investment decisions on solid ground, fundamentals. You have however missed Kakuzi; a stock which I guess should rebound to it's highs in mid 2005 given that the country has received substantial rainfall this time around.

DREAMWEAVER said...

Hi Pesa Tu

I concur on the standard group, I have held it for the last two months, it is under valued and the potential it has is awesome.

I hold EA cables, ARM and and the Unga (sleeping giant?)

Will Add Barclays too.

pesa tu said...

@Ken:The finance sector is booming now especially since Gvt paper has dismal returns.But remember that bad debts always lag a leding boom like the current one by 3-5 years.
Microfinance is a ll the rage at the momentExpect the big banks to get further into it.Since, Commissions and charges in the sector are higher than conventional banking.

pesa tu said...

@Riba:Ditto on Standard.
I guess the rate was Ksh22 to 1US$.

Thanks already enjoyinng the new year

pesa tu said...

@JK:Thanks for stopping by.Yes,Kakuzi has the potential.I just havent looked at their numbers,thats why i left it out.

The advantage of looking at the fundamentals before buying is that even if the price declines you know that at some point it will come back to the true value.Unlike naked specualtion where u cut ur losses and sale coz u dont know when the prices will rebound.

pesa tu said...

@Dreamweaver:Am not sure about Unga in the long term because they have a large mkt share but they cant convert it to profits.
But as a speculative play the low price makes it worthwhile.Once enough 'new' investors eye it it can rise like Firestone

coldtusker said...

Nice to see some posts from u... u were too quiet!

kakuzi will be hurt by strong KShs... they have no coffee BUT are diversified into tea, pineapples & horticulture.

Standard Group will do well but they are laggards vs Nation Group. Standard had KTN (politically connected to moi & crooks) while Nation Media had to fight for their TV & Radio license for many years. I expect Nation's NTV to kick KTN's arse since NTV will prove they are better.

BAT - I agree.

Equity - Too expensive for me. High forward P/E vs other banks.

KenGen - Some gains are from tax writeback. Profits will grow with economy. Buy if price falls to the low 20s.

Total - 2006 will be bad for them but 2007 might be better pending analysis of the "energy bill".

MainaT said...

Pesa TU, good to see you have a balanced portfolio across industrial sectors and look at the fundamentals.
BAT-won't touch on principle as smoking=cancer.
Equity-i think they will have to do a spilt share at some pt this yr or early next yr
Total-see where you are going with them what not Kenol?
KenGen-I am long-term investor in this stock. Apart from govt control, the other issue is that they only have one major customer-the govt/KPL. If govt was divett itself of KPL, this stock would do magic.

coldtusker said...

MainaT - I think you might end up with a limited selection!

EABL - Alcohol - Cirrhosis, DUI, alcohol poisoning... so I assume that means Uchumi, TPSEA & all those who derive income/profits from alcohol are out!

Sasini - Caffeine = health issues including high BP, child labour...

Total & Kenol - Road accidents, (partially) funding terrorism, greenhouse gases, pollution...

KenGen - Greenhouse gases (thermal production), loss of environment...

LOL... BAT is merely an investment... I do not smoke but why not benefit from those who do?

disclaimer: I do NOT smoke!

Anonymous said...

Nobody talks about Mumias. Right now, it is at its lowest point. I think its potential is enormous. By end of this year, maybe the price may reach 100/=. What do other investors feel.

Odegle said...

where do you place nation media. i think if linus continues with kiboro's sprint then this house is set to be big , very big

MainaT said...

CT, lung cancer actually has killed two of my relas so that is why. I know capitalism has no morals, but now and then, I can afford to say no to a money-making ooportunity especially when i think that the greater common good outweighs the individual good.

Otherwise, i invest in a lot of the other cos that you mentioned.

mwasjd said...

And I thought that I was the only one who buys stock on a conscience basis...
I concur on Kengen but when talking of low 20's, how low is low? I made the same mistake with BBK, didn't go to the low 60's that speculators on stocks kenya talked about.
All major financials are definately good buys on the NSE. I'm not sure that election year will mean better performance on the nse for SMG. Dividends are good, got a cheque from Mumias this week, but stock price is disappointing...

coldtusker said...

MainaT - Pole... I am sorry...
I find it difficult to comprehend that in this day & age people still smoke even though we know it kills.

Nation - election year... great management... TV station in Uganda... growth in TZ

KenGen - mwasjd, all is not roses, they had the "tax benefit" last year

Mumias - Don't get carried away. Well managed but not cheap at this price... Growth potential is good since competition e.g. Sony is in trouble.

pesa tu said...

@Mainat: Pole about ur relas.
Kenol is a good long term buy.they are growing revenue by about 20% per year.But dividends are small coz they must re-invest their funds for growth.
Stock prices sometimes go down, so u need dividends to make up your return.

@Mwasjd:Kengen at 25-26 is low enough for me.by the way stockskenya has too many people who r all mouth and no action.They have never experienced a bear market.I have.It isnt pretty u buy a share today for Sh13 and next Friday its at sh7.50.Do u hold or sell?

Love dividends thats why i keep BAT and Total

@ANON: Retail investors may sell for school fees and Easter so i think Mumias may still go ower this year.

@CT: ditto on mumias.Yeah, if there's drought this year(la nina) Kengen may not be alll that.

pesa tu said...

@Odegle: Linus doesnt inspire confidence But the Nation franchise is strong So i expect it to keep generating cash.

coldtusker said...

The company has to be stronger than the individual.

Those who have followed my ramblings... know I like Aga Khan firms. One of the reasons is they have great depth of Management. Linus is an outsider but there are other steadying hands from the Aga Khan esp on the finances.

Andre said...

Any comment on the long term prospects of KQ? I feel its undervalued, currently trading @ 112.

pesa tu said...

@Coldtusker:I like the way Aga Khan firms r managed.I was just expressing my personal opinion.

@Andre: havent looked at KQ

BW said...

Guys....I find this quite interesting. No one is talking about whats happening @ kplc. Fundamentalz...r fantastic.... pe of 15, High Nav, Monopoly, Professional Managment.
Also split coming along...(md said something about looking into it at the agm) and with a price of 330+, its inevitable.

Whats ur take....?

pesa tu said...

KPLc yo-yos too much for my liking.Rememberthe guys who bought KPLC at sh360 per share in 1999/2000 still havent made their money back

BW said...

Dude...i got shares in kplc(bought them at 222).. and i can safely thank everyone in the room and say..thanx....u made me money.
How many other companies can you do that with?
Nextly in 1999/2000 the company was a joke.... losses bigger than the assets of the whole of the Agricultural sector.... kplc...was being screwed by the goons at the helm KANU "golden Years" Right now they have an efficient mngmt, makin money etc.....
Watch this space...Im sure...when the half year results come out.. which I am sure will be positively better....coz of the way things are run ..... im gonna make nuthin less than 150%(of todays prices)

pesa tu said...

@BW: Ha..i bought EABL pre-split at sh.51.U r just a groupie cheering a stock u own. Tell us about fundamentals

bw said...

Ur talking about fundamentals....Thats what I do.
I can tell u about the QAR's 1.3,
NAV 261, PE 15, PEG 1.1, Premium 46kshs. ROI 6.5%(2005/6) expected to go up to 12%. Growth prospects...phenomenal.... only 20% of Kenya has power therefore potential of 80% which is equal to another 2.4m connections potential.
Margins are 40% before system losses(due transmision lines, which are being upgraded)
pesa tu.... Im not a groupie....I hold a degree in Econ so I do know what I am on about...
Another thing, Im not touting anything... i read the previous post on power and decided to shed some light......

bw said...

nextly...I think ur blog is usually quite resourceful....but I think u should keep the "blatant attacks" to a minimum

pesa tu said...

Pole Bw. but i dont mind u attacking me.I intend to have my posts as free as possible.
People should be free to attack my views,opinions and suggestions.

I attacked u coz there was nothing new u were telling me about KPLC

bw said...

righto.....

no offense taken.....

cheers

bw said...

righto.....

no offense taken.....

cheers