Total Kenya shares jumped 11.96% during last week’s trading session to reach KES 25.75 after the oil marketer announced its full year results ending 2013. The results which showed a return to profitability saw the oil marketer post a profit before tax of KES 2.08 billion eventually bringing to an end a two year loss-making streak. The company reported gross sales of KES 155 billion, a 29.5% increase over twelve months ago as a result of increase in sales volumes. Sales volumes increased by 37% from 1,085 KMT in 2012 to 1,491 KMT in 2013, an increase attributed to sales to other Oil Marketing Companies (OMC’s) after the company won several contracts to supply the industry with refined products under the Open Tender System (OTS) agreement.
Injection of new capital amounting to KES 5.2 billion mid last year helped the oil firm significantly cut its debt load evidenced by its finance costs dropping to KES 0.27 billion from a mighty KES 1.55 billion recorded in the previous year. Optimisation of its financing needs coupled with falling interest rates also saw its operational expenses improve to KES 4.3 billion from KES 4.65 billion in the same period. Other income increased by KES 154 million as a result in rents and commissions coupled with increase in bad debt recoveries. Industry figures now place Total’s market share at 20.5% owing to its strong sales performance.
At the start of last October saw the stock jump 50% in a single month following news the surrounding cash injection from its major shareholder, Total Outer-Mer. Since then the price has been confined within the price span of that single massive move, from KES 18.6 to its three year high of KES 28 in a range firmly set at KES 21 and KES 26. With a temporary low established at KES 20.75, the stock currently faithfully trades inside these price bands. This low is now set to become a major support on pullback (a falling back of a price from its peak, typically seen as a brief reversal of the prevailing upward trend), providing a buying opportunity as well serving as a stop loss level. Minor support is at KES 22 and can be used as an entry for new buy positions. Short-term traders or those already in long term positions, can take advantage of this, but for long term traders establishing positions near the top of this range is not well advised.
While the stock trades 26.4% lower from its five year highs, its gained a whopping 98% from its five year lows of KES 13. Presently, the oil stock is also trading above both its mid-and long term exponential moving average (EMA) set at KES 23 and KES 21.59 proving that the stock’s upward momentum has not waned. In fact short term momentum has shifted to the upside. Its market performance year to date (YTD) is the strongest amongst the two listed oil stocks, up 4.04% while Kenol Kobil is only up 1%. NSE 20 Index follows behind with a gain of 0.3% in the same time span.
Investors ought to take note that the stock is not in an uptrend, but the price is in close proximity to the top of its range. This means an upward breakout could easily see a resumption of its uptrend. The KES 26 level is the resistance to cross over. The target for the next higher swing is KES 31 to KES 32; this could occur shortly with a rally above KES 28 or may require the pullback first in order for the oil stock to gather more steam. If the price can’t break through this resistance, the range will continue and the price is likely to oscillate inside it. However, if a pullback occurs, investors can look to buy inside the region between KES 20.75 and the current price level.