VituVingiSana wrote:I think KK will suffer some 'loss' due to weak KES but they will gain market share over the next few months since some small OMCs will close up shop!
Of course, KK can always roll back the Deal Poa to shore up the margins! I will only fill at KK on Deal Poa days!
The Kenyan Oil market currently resembles what has been happening in the Kenyan Pharmaceutical Industry.
A dominant player is able to act as both a wholesaler and retailer in the same market. What happens is that the Wholesaler begins selling to the final consumer at prices which he would have sold to the retailer, effectively eliminating the retailer from the chain.
KK is going even further and is monopolising the entire chain from Importation, to Wholesaling to Retailing. As such, it can effectively sell at wholesale prices at the pump (retail level) effectively killing the retail level competition (and hence the profit warnings by competitors).
Its large African retail network coupled with its OTC supplies is neccessitating bulk oil purchases that create economies of scale (lower overall procurement price) and hence the need to increase storage facilities to support the bulk purchasing.
The down side is the need also for higher debt to facilitate the bulk purchases which will considerably increase finance costs especially with the weakening shilling.
Going forward, i still expect the company to report above Ksh 2 EPS for 2011 (Second Half EPS of at least Ksh 0.53).
A price below Ksh 9 will thus be highly welcome for purposes of accumulating more shares in this company.
Happy hunting.
x handle: @stocksmaster79