Ghana: Benso Oil Palm Plantation Limited, Year ended December 31, 2011

Financial Performance review
Benso Oil Palm Plantation Limited , reported an 80% increase in revenues from GHc 19.4 Million to GHc 34.8 Million. Profits after tax rose by 266% from GHc 2.7 Million to KES 9.8 Million.

The net profit margin rose to an impressive 28% compared to 14% in the prior year.

Operating environment and outlook
Benso’s growth in revenues was driven primarily by an increase in Crude Palm Oil Production and an upward trend in prices.

Wilmar International Limited, a Singapore headquartered agribusiness, acquired a majority of Benso’s shares from Unilever in early 2011. Wilmar’s core business is palm oil cultivation and processing; cost efficiencies enacted by Wilmar are already paying off as evidenced by the sharp rise in the net profit margin.

The good weather experienced in 2011 and the high world market price for palm crude oil are expected to continue into 2012. The operational efficiencies enacted by the new majority shareholder are likely to be sustained. The company is therefore likely to post a strong performance in 2012.

Investment analysis/Recommedation
The company’s share price closed (on February 14, 2012) at GHc 1.77; an all time high. The last period the company traded over GHc 1.00 was in the fourth quarter of 2008 when it a high of GHc 1.30 in October 2008.

With earnings per share of GHc 0.2808, the company is trading at a PE ratio of 6.3. On this basis alone the share is cheap.

The company has zero bank debt and has a huge and growing cash balance; the cash balance rose to GHc 7.47 Million up from GHc 2.5 Million in the prior year.

At the current market capitalization, the price book to value is 2, a fairly reasonable figure for a company that highly cash generative.

The dividend yield is 3%. The total dividend payout is up by 60%. While this is a significant increase it is much less than the growth in profits indicating that management wants to plough back funds to grow the company.

Recommendation:
The share is a buy even after the strong rally in share price in the year to date. The company is cheap as measured by the valuation metrics above

The main challenge with the share is the very low volume of shares traded on a daily basis making it difficult to build a significant stake.

Kenya: Sasini Limited, Year ended September 30, 2011

Financial Performance review
Sasini Limited , East Africa’s largest listed tea and coffee producer, reported a 16% rise in revenues  to KES 2.99 Billion from KES 2.66 Billion.

Profits after tax fell by 60% from KES 980.9 to KES 391.2 Million. Most of the drop was due to a fall in revaluation gains related to biological assets. The operating profits advanced by 9.91% to KES 387.5 Million from  KES 352.5 Million reported in 2010.

Operating environment and outlook

Sasini’s performance was helped by a favorable exchange rate (the Kenya Shilling weakened and stayed weak throughout the year).  Drought conditions caused a drop in production of both coffee and tea in the first three months of 2011.

The weather conditions from the last quarter of 2011 and early 2012 have been favourable. The volume of tea sold at the Mombasa auction in January 2012 was 28 Million Kilos compared to 18 Million Kilos in January 2011. The exchange rate is expected to remain above KES 80 to the dollar for the rest of 2012 which will be good for Sasini. 2012 prospects for the company look good.

Investment analysis/Recommedation
The company’s share price closed (on February 13, 2012) at KES 11.10; 26% below its 52 week high.

The share is inexpensive, trading at a PE of 6.47. The price to book value is only 0.37. Even after excluding the accumulated gains on revaluation of biological assets (un- distributable reserves) the price to book value is still a cheap 1.54.

The dividends paid in the year KES 1 (50 cents interim and 50 cents final) translate to a yield of 9.01%.

Recommendation:
The share is a long term buy. The recent steep fall in price following the shares going ex-dividend presents an opportunity to take a position cheaply. Demand for tea, coffee and for agricultural commodities in general is expected to rise with the expected growth in income and population in the region and in Sasini’s export markets.

There are major risks such as exchange rate fluctuations and change in climatic conditions. A steep rise in the shilling or a major drought will deal a significant blow to Sasini’s performance.

Link: Sasini Financial Data

Kenya: Rea Vipingo Year ended September 30, 2011

Financial performance review
Rea Vipingo, East Africa's leading sisal producer, reported a 594% growth in profits after tax. Net income climbed from KES 67.3 Million to KES 467.2 Million.

Gross Margin for the period was 58%. The Net Profit Margin was 22%.

Operating environment and outlook
The firm’s recent success is attributed to favourable weather conditions that led to a bigger and higher quality sisal yield from its farms in Kenya and Tanzania, along with the weakening of the Kenyan shilling against the dollar translating into higher income in the local currency.

Operating costs have been climbing but with the now stable exchange rate and favourable weather conditions the performance of the company is expected remain strong in 2012.

The company plans to diversify into horticulture production; a high potential income stream which should shield the company from volatility in the prices of sisal.

Investment analysis and recommendation
The share is cheap on a PE basis, and in the long term the global demand for sisal is expected to grow. At the current price of KES 16.15 Rea Vipingo’s trades at a P/E ratio of only 2.07.

The proposed dividend payout of KES 1.10 a share translates to a dividend yield of 6.8%.

Recommendation:
The share is a long term buy

The main challenges are the low liquidity of the shares (daily traded volumes are less than 50,000) and volatility of the share price.