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Short rains expected to boost agricultural stocks at NSE

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Agricultural stocks have gained value since the beginning of the year. Williamson Tea has maintained the top spot with 46 per cent share price growth



The onset of the short rains season has raised expectations that agricultural stocks will record improved production this year, lifting their share prices at the stock market.

Williamson Tea, Limuru Tea, and Kakuzi share prices edged up in Monday’s trading at the Nairobi Securities Exchange on expectations that the relatively weak shilling will also boost the plantation firms’ earnings.

Williamson Tea’s share price closed at Sh285 from Sh270, a 5.56 per cent increase from Friday’s level.

Prices of other agriculturals including Kakuzi (Sh125), Limuru Tea (Sh356), Rea Vipingo (Sh19) and Eagads (Sh35.25) held firm at a time when most stocks at the NSE were on a decline, while Sasini Tea’s share dropped by 1.49 per cent to Sh13.25 from Sh13.40.

“People are expecting good results because we have had good weather and prices,” said Mr Robert Munuku, a research analyst at Drummond Investment Bank.

Tea stocks in particular are favoured by investors as global prices and the shilling’s weakening mean higher returns. Sasini Tea is yet to release its results, but analysts said there is interest on the stock especially among investors interested in dividend.

Despite the interest, the share lost ground marginally from Sh13.40 to Sh13.25 yesterday, a 1.12 per cent drop.

“Any stock that gives an investor exposure to tea is good,” said Johnson Nderi, research analyst at Suntra Investment Bank. Williamson Tea’s net profit for the half year ended September 30 rose to Sh805 million from Sh456 million over a similar period in 2010, but the firm’s management was less optimistic on the results being mirrored in the next financial half.

Operational costs

“The performance of the remaining period to year end will be impacted by the behaviour of the Kenyan shilling against foreign currencies and an increase in operational costs. The directors therefore do not expect the current performance to be replicated in the remaining part of the financial period,” said Williamson Tea while releasing its half year results last week. By the close of market Monday, there were 50,000 Sasini Tea bids against 4,600 shares on offer.

The weak shilling has been seen favouring agriculture as it results in higher earnings. The possibility of capital gains could not be ruled out entirely, said Mr Munuku.

Since the beginning of the year agriculturals have gained in value with Williamson Tea maintaining top spot with a 46 per cent increase in its share price to Sh270 from Sh180.

Sasini has gained 0.3 per cent to Sh13.40 from Sh13.35, Limuru Tea 19 per cent to Sh356 from Sh300, Rea Vipingo three per cent or Sh19 from Sh18.45, and Kapchorua 25 per cent to Sh125 from Sh100.

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