Rea Vipingo is the largest sisal fiber producer
in Africa.
Performance
6 Months ended
|
6 Months ended
|
||||
March 31, 2011
|
March 31, 2012
|
||||
KES'000
|
KES'000
|
% Change
|
|||
Revenues
|
974,725
|
1,250,034
|
28%
|
||
Profit after tax
|
153,402
|
208,402
|
36%
|
||
EPS
|
2.56
|
3.47
|
36%
|
||
12 Months
|
|||||
Trailing EPS
|
9
|
||||
Closing share price
|
|||||
as at June 6, 2012
|
16.60
|
||||
Trailing PE
|
1.91
|
||||
Revenues increased by 28%, profits and earnings per share by 36%.
This was a superb performance considering that in the year ended September 2011
earnings had risen by over 500% compared to the performance for the year ended
September 2010.
Operating Environment/Outloook
The Kenya Shilling has been depreciating over the last few months
and is likely to drop further in the course of the year because of the country’s
yawning current account deficit.
The weakening shilling should translate into a favorable performance
for Rea Vipingo since exports most of its produce and its earnings are
therefore mostly denominated in US Dollars.
Investment Analysis
Rea Vipingo (like most other agricultural stocks listed on the
NSE) is greatly undervalued. The current PE of less than 2 means that it will
take less than two years for holders of the stock to earn the full value of the
share. If the earnings momentum from the first half is maintained for the full
year the valuation will fall even lower.
In the most recent financial year Rea Vipingo declared a dividend
of KES 1.10. At current prices this translates to a yield of 6.63%.
Recommendation
The share is trading at a huge discount; it is a good long-term
buy. As demand for agricultural products increases and as the level of sophistication
of investors at the Nairobi Securities Exchange develops, agricultural stocks will
become more fairly valued; patient investors will be rewarded accordingly.
The relatively low liquidity of the counter (very few shares trade
per day) will however make it difficult for a high net-worth/institutional
investor to accumulate a meaningful stake in a reasonable period of time.
Quote:
“One way to end up with $1 million is to start with $2 million and
use technical analysis.” ~Ralph Seger
