Analysis of Kernel 2014

Company: Kernel

ISIN LU0327357389 | WKN A0M7QF

Business: An Ukrainian agricultural and logistics company. They have six different business units: Sunflower Oil in Bulk (buy sunflower seeds and crush them to oil), Bottled Oil (sold under the brand names: Schedry Dar, Stozhar and Chumak Zolota), Farming (producing all kind of crops), Grain (logistic handling of bought crops), Export Terminals (export of the grain and oil via harbours) and Silo Services (storage and drying of crops before export and sale).

Active: Agricultural production in Ukraine and Russia. The products are exported and sold all over the world according to world market prices.

P/E: -6.0 (P/E5: 4.6)

Comment: Since their products are sold according to the world markets prices in dollar they also report everything in dollar. I have therefore decided to step over to dollar in the analysis which makes it slightly different from before.


Here you can find the previous analysis of Kernel 2013.

The P/E is awful due to losses during 2014 and are therefore down at -6.0. The P/B is however still good with 0.6 either way due to the loss Kernel gets a no go from Graham. Earnings per share and ROE are both negative. The book to debt ratio is however great with 1.2.
In the last five years they have had a spectacular yearly revenue growth of 18.6% which then gives us a motivated P/E of 30 to 35 which means Kernel is undervalued today.
They have as of yet still not paid a dividend but they propose to pay 0.25 USD per share. I believe it when I see it.

Conclusion: Graham says no to Kernel and as a shareholder I see a bad year. Looking at Kernel with fresh eyes from the outside I would probably say no to Kernel today and wait until they show some figures that indicates that they have managed to turn things around before I would even consider to step in with an investment.

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