Investors Diary

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Thursday, July 19, 2007

Speculators Crave for Mumias again

The week saw speculators running to buy mumias shares in the bid to make a quick kill after several months of depressed activity and price reduction.

Speculations:There are also speculations that:
1. Acquisitions:The miller is the front runner in the acquisition/management of the other dormant competitor (Miwani Sugar Company) which would add to its portfolio and subsequently future returns from the company.
2. Electricity generation:The company has been pursuing an extensive expansion programme that saw it make inroads into electricity co-generation that will enable it save on costs and enhance revenue. The project cost was deemed to be around $50M.
3. Bonus:There are also talks of an impending bonus issuem (2:1) by the company though this facts are yet to be confirmed officially.
4. Contracts:The company has also signed a 10-year agreement with the Japan Finance Corporation(JFC) to sell carbon credits from its power generation activities with expectations to displace about 100,000 tonnes of carbon which would be traded in a system similar to trading of securities or commodities.
5.TARDA project:Mumias also eyes to put up a new sugar mill within the Tana River delta. In a recently signed joint venture with Tana River Development Authority (Tarda), the company envisages to put up a plant with capacity to crush 6,000 tonnes of cane a day within the delta even though the venture is likely to include co-generation and ethanol production.
Price rally: The above fundamentals support the latest surge that has seen miller’s stock price rise steadily in the past three weeks.Last week, the Mumias stock clocked a high of Sh32.30 after nearly six months of poor performance that saw it plummet from about Sh54 in November last year to an average Sh25. At the close of trading yesterday the stock was trading at an average price of Sh29.75.
However, the Comesa Free Trade Area (FTA) will expire in March next year and as such is expected to negatively affect the performance of the stock.

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