Buy Bamburi, hold or accumulate Liberty

NSE Indices: Last week, the NSE blue chip index ended the week at a weaker position compared to the previous week. The NSE 20 Share Index on Friday closed at 3,790.54, down from the 3,833.07 points it recorded at the end of the previous week.

The NSE All Share Index closed the market at 140.49 points. On the other hand, the NSE 25 share Index ended the market at 4,059.76 points, which was a gain of 7.86 points from the closing position recorded the previous week.

Bamburi: This stock is ripe for buying. This is according to a market report by Relic Capital. The green light to buy Bamburi comes in the wake of revelations that it has raked in Sh1 billion from the supply of 300,000 tonnes of cement to the standard gauge railway (SGR) contractor.

Effectively, this supply increased Bamburi’s cement production by 10 per cent to 2 million tonnes annually. This year, Bamburi expects to supply 150,000 tonnes of cement to the SGR project.

According to Mr Robert Ochieng’, a research analyst at Relic Capital, Bamburi is expected to report higher returns in its current financial year. “Bamburi is expected to record higher revenue margins from improved sales on higher grade cement and exports to inland Africa as well a SGR project,” he says.

In late 2015, Bamburi announced that it had recorded an 85.9 per cent jump in its half year results for the period ended June 2015. Its net profit rose to Sh3 billion from Sh1.6 billion the previous year.

The company reported zero finance costs, with sales rising 11.7 per cent to Sh19.3 billion. Mr Ochieng’ says this increase was largely due improved sales of the 42.5 and 52.5 grade cement. He adds that Bamburi currently holds a high upside potential.

“The company is currently enjoying a great product diversity and this has been cushioning it with positive free cash-flow,” he says.

DIVIDEND

Interestingly, Bamburi recorded a interim dividend of Sh6 per share for the period. This was the same dividend amount the cement maker had paid out the previous full year. On Friday last week, Bamburi closed the market at Sh179 per share from a traded volume of 573,000.

The counter had opened at the same closing price of Sh179 per share. Over the past one year, Bamburi has traded at a high of Sh183 per share and touched a low of Sh135 per share.

Liberty: Investors may opt to either hold or accumulate this stock. This is according to market reports by Relic Capital and Cytonn Investments. According to Cytonn, Liberty currently holds an upside potential of about 6.9 per cent.

This is in spite of Liberty becoming the 18th listed stock to announce a profit warning. The insurer and wealth management firm said that it expected its financial results for the year ended December 2015 would fall by at least 25 per cent.

The profit warning was in sharp contrast to the Sh1.15 billion net profit that Liberty posted in the 2014 financial year. According to Liberty, the dip in profits will be due to the on-going bear run at the NSE, where Liberty has heavily invested.

“There was a decline in asset values which negatively impacted the investment income,” Liberty said in a statement to the NSE. Nonetheless, Liberty continues with an expansion plan that was set in motion by its entry into the Ugandan market. Last month, Liberty announced that it was acquiring a 51 per cent stake in East Africa Underwriters Ltd (EAUL) in a bid to establish its presence within the East African market.

Mr Ochieng’ says Liberty is expected to start venturing into counties while diversifying its income in a bid to reduce on its exposure at the local bourse.

On Friday, Liberty Kenya closed the day at Sh15.95 per share from a traded volume of 6,900. This was a loss of 1.85 per cent from the Sh16.25 per share price recorded the previous day. Over the past one year, Liberty has touched a low of Sh15.55 per share from a high of Sh28 per share.

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