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Impact of falling Kenya Shilling exchange rate on Agricultural counters

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mwanahisa		#1 Posted : Wednesday, March 16, 2011 4:38:44 PM
Rank: Elder Joined: 6/2/2008 Posts: 1,438		The Kenya shilling has fallen quite significantly against most hard currencies over the last year. It has especially been battered in the last month or so, which would suggest that it may just claw back some ground. Having this in mind, what do guys think will be the impact of this on our Agricultural counters on the NSE? I am aware that fears have been expressed regarding output on account of the drought, but USD prices for agricultural commodities have generally held up, in spite of the Egypt revolution. On the other hand the prices of Agrics on the NSE are at their lowest for the last 6 months or so. Is this not the time to be buying into these counters? DISCLOSURE: I hold WTK, Limuru Tea and some Eaagads.
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VituVingiSana		#2 Posted : Wednesday, March 16, 2011 4:54:34 PM
Rank: Chief Joined: 1/3/2007 Posts: 18,356 Location: Nairobi		Therein lies the rub. The prices can be as high as $4/kg but if you do not have enough to sell, you are screwed. From what I understand, there is a huge shortage of leaf [some factories are working only 2 shifts not 3 in 2010] while others have closed down. Greedy when others are fearful. Very fearful when others are greedy - *to paraphrase Warren Buffett*
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mwanahisa		#3 Posted : Friday, March 18, 2011 3:39:01 PM
Rank: Elder Joined: 6/2/2008 Posts: 1,438		@VVS, The companies that had closed their factories if I remember the newspaper reports are Unilever and KTDA. The rains have now come, so I imagine this problem will no longer be an issue. And BTW, someone who attended the recent Sasini AGM says drought was not even an issue at the meeting. Apparently the Directors were quite upbeat on the performance for the first half ending 31st March 2011.
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VituVingiSana		#4 Posted : Friday, March 18, 2011 3:47:40 PM
Rank: Chief Joined: 1/3/2007 Posts: 18,356 Location: Nairobi		mwanahisa wrote: @VVS, The companies that had closed their factories if I remember the newspaper reports are Unilever and KTDA. The rains have now come, so I imagine this problem will no longer be an issue. And BTW, someone who attended the recent Sasini AGM says drought was not even an issue at the meeting. Apparently the Directors were quite upbeat on the performance for the first half ending 31st March 2011. My friend... The rains have to be CONSISTENT... tea is produced all year round though there are seasons as well... but we need a lot more rain. Consistent rain. I hope the rains continue for another 3 months otherwise the tea will stunt + not enough water for hydropower [thus raising production costs for tea]... Sasini FY is 31 March 2011 so they will not be affected as much this FY. Also depends where the farms are & whether they have dams/irrigation. Not all farms are in the same boat. Greedy when others are fearful. Very fearful when others are greedy - *to paraphrase Warren Buffett*
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mwanahisa		#5 Posted : Friday, March 18, 2011 3:48:41 PM
Rank: Elder Joined: 6/2/2008 Posts: 1,438		Also note Kakuzi would most likely have reported RECORD profits were it not for the poor results on the Fuerte Avocado crop, notwithstanding the good performance on tea operations which were ahead of the 2009 levels. Most of the profits (73%) were generated in the 2nd half of the year notwithstanding that drought set in from around October last year.
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mwanahisa		#6 Posted : Friday, March 18, 2011 3:54:28 PM
Rank: Elder Joined: 6/2/2008 Posts: 1,438		AGREED about the need for consistent rains. If 2009 was anything to go by, the reduction of leaf, resulted in record tea prices since Kenya is the biggest exporter in the world for black tea. Hence, could not the reduction in production be offset by higher USD prices and higher exchange rate for the USD against the KSh? BTW, Sasini's year end is 30th September.
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Tommy		#7 Posted : Friday, March 18, 2011 6:10:46 PM
Rank: Veteran Joined: 12/9/2010 Posts: 894 Location: Nairobi		i think the foreigners will buy more since they will buy cheaply and make gain on foreign exchange. bargains like sasini at 10, kakuzi at 72, unga at 9.50 are bargains for mid term. Don't wait for the Last Judgment. It happens every day. ~Albert Camus, The Fall, 1956
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mwanahisa		#8 Posted : Friday, March 18, 2011 6:24:23 PM
Rank: Elder Joined: 6/2/2008 Posts: 1,438		Tommy wrote: i think the foreigners will buy more since they will buy cheaply and make gain on foreign exchange. bargains like sasini at 10, kakuzi at 72, unga at 9.50 are bargains for mid term. I would expect as much. The problem is that it is difficult for any big buyer to get a big chunk of these shares as they are very tightly held. The only one of these companies that trades reasonably big volumes is Sasini but it is generally believed in the market (certainly by Wazuans) that it is the worst of the lot. This is largely due to OUR negative perceptions of the main shareholder, although I respect the Chairman (Jim McFie) a great deal. Secondly, their accounting policies are a lot more aggresive than their counterparts. But at today's price of 9.55, that gives you a dividend yield of over 5%, with a PE close to 2 and a Price to Book ratio of about 1/3. Surely, one could do worse. I am voting to pick it at these levels for long term investors.
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VituVingiSana		#9 Posted : Friday, March 18, 2011 7:31:43 PM
Rank: Chief Joined: 1/3/2007 Posts: 18,356 Location: Nairobi		Oops! Sasini FY ends 30 Sep 2011... I was thinking Williamson... I like McFie [even studied under him] but I do not trust merali... Greedy when others are fearful. Very fearful when others are greedy - *to paraphrase Warren Buffett*
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Tommy		#10 Posted : Friday, March 18, 2011 9:09:51 PM
Rank: Veteran Joined: 12/9/2010 Posts: 894 Location: Nairobi		i also dont trust this merali guy. however this stock looks attractive at the current price. btw, at what price are investors expecting to pick their stocks? this is how bargains slip from investors. Don't wait for the Last Judgment. It happens every day. ~Albert Camus, The Fall, 1956
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