Financial
Performance review
Crown Berger, Kenya’s
leading paint-maker having a 65 per cent stake in the market, reported a 26%
increase in Revenue from 3.1 billion in 2010.
The pre-tax profit rose by
18% from KES 169.48 Million to KES 200.54 Million. The rise in profits was
attributed to comprehensive campaigns in selling and distribution that had
promoted the growth in sales.
Operating
environment and outlook
Rapid growth of the Kenyan
construction industry saw the sector emerge as the country’s top performing
sector in the first quarter of 2011, according to data from the Kenya National
Bureau of Statistics. The sector grew by 10.7% in comparison to the bleak
performance of 0.3% in the same period of 2010. This remarkable growth is set
to continue as a result of increasing population and major infrastructure
projects. Consequently, the paint consumption in this industry is expected to
mount in 2012.
Opening of a regional
market through COMESA and East African Community will be an additional plus to
do business across the borders more freely hence generate more revenue.
Investment
analysis/Recommendation
The company’s share price closed (on June 11, 2012) at
KES 34.75; 3.5% below its 52 week high of KES 36.00.
The share is priced
fairly, trading at a PE of 6.39. The price to book value is 0.8. This is still
among the lowest price to book values in its industry. Thus, Crown Berger presents
a favourable investment for value investors.
The dividend per share for
the year is KES 1.25 which gives a yield of 4.6%. Although the company does not
offer the highest returns in the construction and allied segment, Crown Berger is
still competitive and offers good return to its shareholders.
Recommendation:
The share is a good long
term buy. Generally, the share price has had an upward trend over the last six
months despite the small margin drop. Crown Berger is a stable share. As stated
earlier, due to the continued construction boom, avenues for development of new
markets are set to increase profits for the company.
Nevertheless, investors
should have a keen eye on certain risks such as inflation rates risks that may alter
the prices of raw materials and the prices of their products and in turn the
profitability of the company.
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