Skip to content
Shares and Stocks

Stock Watch: Total Kenya Ltd

BY · April 1, 2015 03:04 pm

Total Kenya Ltd announced their audited results for the period ended 31st December 2014 on 1st April 2015:

RECOMMENDATION: HOLD, Fair Value Est. 27.98 (5.58% Upside)

Languishing Top Line: Net Sales Growth Slowed to KES 155.10 Billion up 9.44%

Compared to the 5 year CAGR of 36.54% in net sales growth and 31.89% growth recorded FY13, net sales decelerated quite significantly in 2014.  Consequently, the gross profit margin inched down to 4.35% (4.48% FY13) at an absolute value of KES 6.75 Bn. This slowdown may be attributed to stiffening competition for OTS contracts from local and international oil marketers who have managed to take advantage of the global drop in crude oil prices to offer more competitive bids for Government tenders.

8.44% Rise in Operating Profits to KES 2.69 Billion Bearing a Minute 1.73% Operating Profit Margin

Total Kenya managed costs well over the period under review registering a slight 5.20% increase in operating expenses to KES 4.55 Bn, however, despite this achievement profit margins remain low indicative of a high concentration on low margin, high volume fuel business lines. Working capital management was improved further by a reduction of both inventory and trade payable therefore shortening the cash conversion cycle to 21 days (24 days FY13) while maintaining adequate liquidity as measured by the 1.49x current ratio. However, of grave concern for the OMC’s operations is the negative cash from operating activities of KES -7.08 Bn which contradicts operating profits on the income statement signifying that either; 1.) Credit sales far outpaced cash expenses resulting in larger receivables of KES 10.58 Bn FY14 or 2.) Deferred payment on a large inventory purchase was settled resulting in cash payment and 63.88% reduction in trade payable FY14 without subsequent sales.

Bottom Line: 9.91% Growth in Pre-tax Profits to KES 2.28 Billion, 8.52% Growth in PAT to KES 1.42 Billion

Pre-tax and after tax profit margins remain at lows of 1.47% and 0.92% respectively with return on equity at 8.96%. The company declared dividend per share of KES 0.70 yielding 2.69% indicative of 30.97% payout ratio. The counter is currently trading at 11.7x earnings at a p/b of 1.02x against sector multiples of 12.2x and 1.45x respectively.

Outlook: With limited forward guidance from Total’s management, our observation is that profitability shall continue to be hampered by the low margins offered on the fuel business partially due to effective price controls. Ensuing low international crude oil prices should aid the company’s working capital management and lower financing requirements going forward.

Trending Stories
Government and Policy Kenya Is Struggling With Debt As Modest Revenue Is Collected With Limited Development Investment Steve Biko Wafula
Entrepreneur's Corner Kenyan Clients Don’t Care Whether You’re In the ICU: The Brutal Truth Of Entrepreneurship Soko Directory Team
Government and Policy Saccos Clamp Down On Struggling Businesses, Recover Sh491 Million In A Ruthless Crackdown Soko Directory Team
Headlines Are The SACCOS The Infinite Money Glitch Of Kenya? Soko Directory Team
Entrepreneur's Corner The Greatest Skill Everyone Should Master Is The Skill Of Knowing How To Manage Money Soko Directory Team
Related Articles
Investment Investing in the Stock Market 101
Market News Mumias edges up 5.41 percent to emerge highest gainer
Market News CFC Stanbic declines to emerge top loser of the day.
Market News Flame Tree stock declines to emerge top loser of the day.
Money Safaricom largest mover of the day with 28.36 percent of total market turnover.
Explore Soko Directory
Banking Blogging Commodity Watch Did you know Entertainment Entrepreneur's Corner Feature Government and Policy Headlines Investment Lifestyle Market News Money Opinion Press Releases Stock Watch Technology
Soko Directory Archives