Morning Market Brief 3rd December 2018
Bamburi Cement Limited (NSE: BAMB) Profit Warning
Bamburi Cement Limited (NSE: BAMB) has issued a profit warning relating to its FY18 financial results, with EPS expected to dip by more than 25% y/y from KES 4.54 in FY17 to about KES 3.41. As at 1H18, EPS declined by 66.5% y/y to KES 1.47. The Group attributes the expected decline in profitability to i) difficult market conditions, ii) increasing power costs in Kenya, and iii) additional provisions in Uganda, mainly receivables. The difficult market conditions could be attributed to the low cement uptake in the industry which declined by 7.9% during the 1H18 period. Additionally, increased competition in the industry has forced the group to cut its product prices to remain competitive. Bamburi has completed the first phase of its expansion plan which is expected to increase capacity to 3.2Mn tonnes p.a. and new products starting 1H19. We are currently reviewing our recommendation on the counter which is trading at KES 145.25, a 21.2% upside potential from our Target Price of KES 176.10.
As we start off the week, we expect unchanged market activity from the previous week with the festive mood creeping in. Turnover levels are expected to remain subdued with foreign dominance especially on the key index counters. We still see foreign interest on EABL which is expected to persist into the week.