Both Dyer & Blair Investment Bank and Genghis Capital have assigned a “hold” recommendation on the stock, meaning that they do not expect its price to swing by more than 15 per cent either way in the short term.
The oil marketer’s net profit for the full year to December remained flat at Sh2.4 billion as one-off costs ate into the benefits that accrued from increased sales.
Its share is trading at Sh16.95, which is similar to Genghis’ target price, having gained 6.4 per cent in the year-to-date.
Analysts see limited upside on the KenolKobil #ticker:KENO share in spite of the firm’s rising sales and a higher dividend payout, with concerns its reliance on short-term borrowings that are exposed to exchange rate risk.
Both Dyer & Blair Investment Bank and Genghis Capital have assigned a “hold” recommendation on the stock, meaning that they do not expect its price to swing by more than 15 per cent either way in the short term.
The oil marketer’s net profit for the full year to December remained flat at Sh2.4 billion as one-off costs ate into the benefits that accrued from increased sales.
Its share is trading at Sh16.95, which is similar to Genghis’ target price, having gained 6.4 per cent in the year-to-date.
“The stock is currently trading at our fair value estimate. This implies a price to earnings of 10.1 times and return on equity of 23.4 per cent against peer average 12.3 times and 12.2 per cent respectively,” said Genghis Capital analyst Gerald Muriuki in an analysis note on the firm.
The firm is paying a final dividend of 30 cents per share, which in addition to a similar amount already paid out to shareholders as an interim dividend brings the total dividend for the financial year to 60 cents.
The company paid out a dividend of 45 cents in 2016.
Dyer and Blair analyst Faith Mwisywa says in the firm’s note that although KenolKobil was able to reduce its overall debt, its short-term borrowings—mostly dollar debt—which represent nearly a third of total equity and liability are exposed to exchange risk.
“Foreign exchange volatility and heightened competition is expected to continue posing a threat to the company,” said the Dyer analyst.
KenolKobil closed the year under review having cleared its long-term borrowing while short-term borrowings remained flat at Sh7.3 billion, as finance costs finance costs came down to Sh340.7 million from the previous year’s Sh354.7 million.
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