Kenya’s Cement Industry Is Rated Accumulate at Kestrel Capital

Kenya’s cement industry, the largest in East Africa, will benefit from increased government spending on infrastructure projects and investors should buy shares on price dips, Kestrel Capital East Africa Ltd. said.

“Increasing government capital expenditure in power and transport infrastructure projects will aid cement consumption growth,” the Nairobi-based brokerage said in an e-mailed research note. Domestic consumption is growing at a faster rate than production, and Kenya’s market is expected to consume 81 percent of output, compared with 77 percent last year, trimming exports, it said.

Cement production in Kenya was 4.2 million metric tons last year, followed by Tanzania at 2.5 million tons and Uganda’s 1.7 million tons, Kestrel said. The broker rated the Kenyan industry accumulate in new coverage.

Kenya is boosting spending on infrastructure as it seeks to more than double its economic-growth rate to 10 percent by 2015 from 4.6 percent last year. Projects planned by the state include a new terminal at the country’s main international airport, a standard-gauge railway from the port of Mombasa to Malaba at the Ugandan border, and a new harbor at Lamu.

Bamburi Cement Ltd., East Africa’s largest cement producer, had its price target raised to 234.42 shillings from 142 shillings, while the recommendation was retained at hold, Kestrel research analyst Kuria Kamau said by phone.

ARM Cement Ltd.’s price estimate was increased to 77.50 shillings from the 43.4 shillings set in July 2011, with the recommendation set at accumulate from buy. Accumulate means investors are advised to buy more shares during price dips, Kuria said.

East African Portland Cement Co., the smallest of Kenya’s three publicly traded cement manufacturers, was rated buy in new coverage with a price target of 111.09 shillings, he said.

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