KenolKobil Company Analysis

Company Analysis

 ‘Analysis should be penetrating not prophetic.’ – Ben Graham

Profile

KenolKobil Limited is a Kenya-based company engaged in the importation of refined and other petroleum products for storage and distribution.

The Company trades in both crude and refined petroleum products, which include motor fuels, industrial oils, liquid petroleum gas (LPG), aviation fuels, lubricants and various other specialist oils.

The Company has an investment portfolio spanning the Eastern, Central and Southern parts of the African continent. It is one of the largest East and Central African oil marketing companies.

The Company has the following subsidiaries:

  • Kobil Petroleum Limited – Delaware, USA (100%) (Investment Holding Co.)
  • Kobil Uganda Limited – Uganda (100%)
  • Kobil Zambia Limited – Zambia (100%)
  • Kobil Petroleum Rwanda Limited – Rwanda (100%)
  • Kobil Ethiopia Limited (Plc) – Ethiopia (100%)
  • Kobil Burundi SA – Burundi (100%)
  • Kobil Mozambique Limitada – Mozambique (100%)

History

Kenol (Kenya Oil Company) has been in existence for almost 57 year now. We would wish to take you on this journey:

May 13, 1959 – Kenol was incorporated and registered at the Nairobi Stock Exchange. The company at this time was engaged in marketing Kerosene under the brand name SAFI.

1960 – Kenol won a bulk supply contract to the City Council of Nairobi. In the first year of operation Kenol attracted over 600 shareholders.

Kenol opened its first two service stations, one along the then Bernard Rd in Nairobi and another along the then London Rd in Mombasa.

1965 – Kenol managed to penetrate in other parts of the country including Sagana, Nakuru, Thika and Mombasa.

1970s – Due to Large scale farming activities in the Central part of Kenya. Kenol invested heavily in those regions i.e. Maragua, Nanyuki, Nyeri, Embu, Meru, Chuka and Sagana.

1972 – Kenol opened more filling stations in South Western Kenya and in Kisii. The company managed to increase and secure long term agricultural contracts driving expansion.

1975 – 1976 – Kenol rebranded and dropped its old ‘leaping zebra’ logo. The company set up a new operational HQ at Ruaraka.

1970s – The company planned to commence marketing lubricants.

1980s – Kenol had a challenging time period and was placed under receivership, however, it turned out resilient and resumed operation in 1983. Contracts from parastatals were subsequently acquired.

The company commenced importing refined products and crude oil and was put on a permanent refining programme at the refinery. It then expanded into export business, and aviation refueling in both Moi International Airport and Jomo Kenyatta International Airport in Nairobi.

1986 – The co. moved to its current HQ at the ICEA building along Kenyatta Avenue.

1987 – Kenol entered into a joint operation with Kobil Petroleum Limited. The staff of both companies were integrated to avoid duplication of jobs. Depot operations of the two companies were combined in order to make operational savings, benefit from technical advice and achieve delivery efficiency.

1990 – Kenol began offering credit card payments, a new mode of payment in the service stations.

1997 – Kenol conducted another corporate rebranding exercise.

1999 – Kenol began its regional expansion programme. It established Kobil Uganda Limited.

2001 – Kobil Tanzania was established

2002 – Kobil Petroleum Rwanda SARL and Kobil Zambia were incorporated.

2005 – Kobil Ethiopia was established.

2008 – Kenol acquired 100% shareholding of Kobil Petroleum Limited, hence the current company name ‘KenolKobil.’ The acquisition was a Non-cash Transaction through the issue of 45,480,000 Kenol shares as consideration at a price of KES 113.73 per share amounting to KES 5,172,440,000.

2009 – KenolKobil acquired 100% of Oil Burundi SA changing the name to Kobil Burundi SA. KonolKobil got into a joint venture with Engen acquiring the Shell & BP operations in Zimbabwe.

2010 – Kobil Zimbabwe and Kobil Mocambique were set up.

2011 – The company launched 2 new oil trading desks, one in Dar-Es-Salaam and in Harare.

2015 – Disposed its shareholding in Kenol Tanzania, which operates 17 fuel stations, and in KenolKobil Congo SPRL, which owns a 4,000 cubic meter dry storage facility in Lubumbashi. The Managing Director said in a phone interview with Bloomberg, ‘There is a lot of tax evasion in those two markets and we don’t want to compromise ourselves.’

Financial Performance Highlights

2000 – 2008

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PAT - 08.JPG

Capital - 08.JPG

EPS - 08.JPG

2009 – 2015

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Since 2000 to date KenolKobil has been making continuous profits the only loss recorded was in 2012 of about KES8.96Bn. The loss was attributed due to an unfavorable business environment, volatile international oil prices, high inflationary pressures and volatile exchange rates which led to foreign exchange losses.

Something to note is that KenolKobil operates under tight gross margins (below 10%) hence it may come under pressure due to accelerated downward price adjustments by regulators and adverse forex valuations.

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*EPS fell drastically from 8.77 in 2009 to 1.20 in 2015 due to the acquisition of Kobil in 2008 thereby increasing the number of shares more by 45,480,000 hence diluting the EPS.

Latest Financial Results

For the fiscal year ended 31 December 2015, KenolKobil Ltd revenues decreased 5% to KES86.56B.

Net income applicable to common stockholders excluding extraordinary items increased from KES1.09B to KES2.48B.

The Net income increment reflects Administrative and operating costs decrease of 22% to KES2.22B.

In 2015 KenolKobil made drastic efforts in reducing their debt burden, proceeds from the disposal of Kenol Tanzania and DRC aided in reducing this figure. According to Standard Investment Bank in a research note KenolKobil has become increasingly debt averse and has reduced its debt by almost 90% since 2013 from a high of KES 15Bn.

Latest News

KenolKobil suspended plans in building a new KES1.5Bn 22-storey building along Haile Selassie Avenue until market conditions improve. This move is aimed to maintain their liquidity position. KenolKobil maintains its HQ at ICEA building.

International Competitors

Company Name PE Ratio EPS DPS
Rubis SCA 15.5 4.5 2.8
Neste Oyj 11.0 2.7 1.0
Al Maha Petroleum Products Marketing Co. 12.6 0.1 0.1
Petrol d.d. Ljubljana 8.5 31.9 11.1
Saras SpA 6.5 0.2 0.1
Hellenic Petroleum S.A. 5.3 0.7 0.2
OMV Petrom SA 11.2 0.0 0.0
Motor Oil (Hellas) Corinth Refineries SA 5.3 1.8 0.6
Shell Oman Marketing Company SAOG 13.3 0.1 0.1
Aldrees Petroleum &Transport Services 11.9 3.3 2.0
Turkiye Petrol Rafinerileri A.S. 7.5 9.9 6.1
Aygaz AS 8.3 1.4 0.8
Oman Oil Marketing Company SAOG 10.0 0.2 0.1
National Gas & Industrialization Co. 11.8 1.9 1.4
Polski Koncern Naftowy ORLEN SA 8.3 8.6 2.0
Total Nigeria PLC 12.8 12.5 11.0
Paz Oil Company Ltd 8.6 70.5 41.4
Saudi Arabia Fertilizers Co. 15.8 4.2 4.4
DCC plc 24.5 2.5 1.0
Afaq for Energy Co PSC 13.9 0.2 0.1
Grupa Lotos SA 9.9 2.8
Qatar Fuel QSC 11.5 13.7 7.0
Azrieli Group Ltd 19.6 7.7 3.3
MOL Plc 10.5 1567.7 552.5
Afriquia Gaz SA 16.3 116.9 107.5
Delek Group Ltd. 20.6 30.6 21.3
UNIPETROL as 7.8 23.5 5.0
Slovnaft as 6.4 10.2 2.0
Mobil Oil Nigeria plc 11.0 13.8 8.9
Total Maroc SA 18.7 37.1 32.1
Total Cote d’Ivoire SA 33.3 555.7 462.5
Yanbu National Petrochemicals Company 17.1 2.4 1.8
Alexandria Mineral Oils Company 6.8 4.0 5.0
Saudi Kayan Petrochemical Company
Jordan Petroleum Refinery Company Ltd. 26.0 0.2 0.1
Nis ad Novi Sad 48.0 12.6
Forte Oil PLC 39.2 7.1 3.5
KenolKobil Ltd 7.8 1.4 0.4

*The figures are in local currencies for each respective country in which the co. is listed.

Top 10 Shareholders (end Jan 2016)

  1. Wells Petroleum Holdings Limited – 20.56%
  2. Petro Holdings Limited – 17.34%
  3. Standard Chartered Nominees A/C KE14861 – 8.64%
  4. Energy Resources Capital Limited – 5.99%
  5. SCB A/C Pan African Unit Linked FD – 3.65%
  6. CFC STANBIC Nominees Limited – 3.21%
  7. Standard Chartered Nominees ltd A/c KE002105 – 2.88%
  8. CFC STANBIC Nominees Limited 1873738 – 2.03%
  9. CFC STANBIC Nominees Limited 1031144 – 1.33%
  10. SCB A/C Pan African deposit admin FD – 1.12%

Institutional Shareholders

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Share Price

Total Number of Shares: 1,471,761,200

Free Float: 97%

Market Capitalization: KES 16.115 Billion

Current Share Price: KES 11.00 (15th April 2016)

Daily Traded Volume: KES 3Mn.

52 week range:

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Return on Equity: 23.5%

Price/Book Value per share: 1.89

We maxed out a 20 year chart of KenolKobil’s share price chart. On 1/4/1995 it closed at share price of KES 6.15. The share price rallied from 2002 – 2004 to a high of KES 42.30 before a stock split that happened later on in June 2004 bringing the price down to KES 5 per share. For the long term passive investor who stuck to his/her positions since 1995 to date. The overall capital gains the investor has made thus far are +78.86%.

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*KenolKobil had a stock split of 10:1 in June 2004 and another 10:1 stock split in May 2010.

Conclusion

KenolKobil operates in the oil/petroleum industry. In looking at such companies one cannot be able to predict demand and dictate pricing as they are factors beyond control, thus the best way from our point of view is analyzing such companies from an operational point of view i.e. over a span of x years does the company consistently produce cash flows? How does it operate under severe market conditions?

Sources: (KenolKobil Annual Reports, Bloomberg, Reuters, Standard Investment Bank, Stockflare, Financial Times, Factset, NSE, Kenyan WallStreet, CMA Quartely Bulletins)

 

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