Wednesday, January 10, 2007

Steer clear of Mumias Sugar unless govt intervenes

The story in the Nation today, shows that on top of lacking enough sugar to crush, next will see the co facing very very stiff competition.


bankelele said...

Govt has now intervened and applied to COMESA to extend the quota. But Mumias appears to be only (diversified) sugar company ready for the new world after 2008.

Riba Capital said...

I hold this same view as Banks; And you will realise that this share will very soon be trading below the Govt's OFS price; whihc is one of the reasons I stayed clear.

Mumias Sugar is a viable investment and one that will give you a healthy return(dividends) and sure capital gains, but thats in the LONGTERM.

All the best to your club; may be you should have invited a few members from Kenya (residents)??

MainaT said...

Until the following issues are resolved, I’ll remain bearish on Mumias with the caveat that I’ll buy if the price goes below 30:
Sugar market: Although MSC has 50% market share; a lot of this will be eaten up if Comesa rivals come on board. It has failed to be aggressive enough to actually find the 200 tonnes mentioned by Kituyi the other day- The TARDA project which is overdue anyway, is now mired in legal suits and secondly will require MSC to issue a bond (increase borrowing costs).
Competition: Yes local rivals will die out first, but that is no consolation. The reason COEMSA rivals are able to compete is because they apparently have lower costs-how can an importer with high transport costs be more competitive? MSC costs have continued to rise over the last four years so then company has not even used the protected period to make itself more efficient.
Diversification: A lot of the ideas, seem to be aspirational rather than well-thought projects.
Carbon Credits: Although it has a deal with a Japanese company, we are not given the revenue/cost numbers
Ethanol-again, this is based on a study and has not even had a cost-revenue analysis done.
Power-the revenue (again no detail), looks like a drop in the ocean to me.
The other thing is even if all these projects take-off, MSC will be implementing them while looking to ward-off compe.

No website: any commercial company with no website is for me a turn-off i.e. they don’t know how to sell themselves; I (as a potential shareholder) don’t have easy access to its information etc
Government interference: as long as MSC continues to have some govt shareholding and to seek its protection, it’ll be unable to take some of the aggressive management tactics required to turn itself into an attractive share.