Mumias stock falls to all-time low as woes persist
The Nairobi Securities Exchange logo. File
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Also recording a significant slide is Kenya Airways, whose stock has felt the effect of the downturn in tourist numbers.
Mumias Sugar Company’s (MSC) woes have pushed the stock to the bottom of the pile as it traded at an all-time low of Sh2.55 on Friday. The fall pushed the company’s valuation below Sh4 billion for the first time ever.
The loss of value followed negative reports that also pushed it to the worst performing stock in 2013 when it lost 33 per cent of its value. The NSE Index gained 19 per cent in the year.
Also recording a significant slide is Kenya Airways, whose stock has felt the effect of the downturn in tourist numbers. Last year, tourist arrivals fell 15.8 per cent to 1.49 million as security worries kept visitors away. The airline counter has shed 22 per cent this year to stand at Sh10.20.
Analysts say Mumias, that once traded at over Sh40, is still in deep financial trouble despite trimming loss after tax by 93 per cent in the first half.
“The emerging issues for Mumias such as illegal sugar importation and temporary shutdown of operations bear direct negative impact to sales revenue and cash flows critical for the company to service its heavy debt burden,” said Genghis Capital analyst Silha Rasugu.
“For Kenya Airways, long-term prospects are good. External challenges such as the impact of travel advisories is more short term and can be offset by the expansion of JKIA, allowing more passengers and more frequent flights through the hub.”
The Nairobi Securities Exchange (NSE) in June issued a review of constituent stocks for its 20 Share Index, which saw Mumias dropped from the list of the benchmark stocks. Some of the requirements for shares to remain on the 20 share index include superior profitability and dividend record.
Mumias is also facing a legal threat of winding up after a bank involved in the controversial importation of 10,000 metric tonnes of sugar sued the firm seeking Sh93 million.
The furore over alleged illegal imports of sugar has already cost some senior staff at the company their jobs, including the former chief executive officer Peter Kebati, who pleads innocence.
Analysts present a less bearish outlook on KQ however, given that the airline has started receiving new planes for new destinations in the Middle East Europe and Asia.
Citigroup Global Markets (CGM), the investment banking arm of international financial giant Citigroup, said in a June report that the KQ share price had an upward potential of 41 per cent to Sh15.50, largely dependent on cost cutting. CGM however noted high fuel costs and competition may continue to dampen profits.
“Profitability may be undermined by both network carriers and low cost carriers, potential infrastructure, regulatory and skill shortage constraints,” said Citigroup.
KQ has also pointed out that the delays in VAT refunds from the Kenya Revenue Authority arising from the new plane spare parts pose a constraint on cash flow at a time the airline is involved in heavy capital expenditure.
