Analysis of Kernel 2015

Company: Kernel

ISIN LU0327357389 | WKN A0M7QF

Business: An Ukrainian agricultural and logistics company with its headquarters in Luxembourg. 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 with the new thing being rapeseed), 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: 7.9


Here you can find the previous analysis of Kernel 2014.

The P/E for Kernel is excellent with 7.9 and so is the P/B with 1.0 which gives a very clear buy signal from Graham. The earnings to sales are down at 5% which is not very impressive however the ROE then look slightly better with 12%, which is ok but not more than that. The book to debt ratio is looking very good with 1.6.
In the last five years they have had an excellent yearly revenue growth rate of 4.2% which gives a motivated P/E of 12 to 16 which would then mean that Kernel is slightly undervalued on the market today. One should however be careful because the growth rate has not improved significantly as of late.
They pay a small dividend in the size of 2.4% which on the other hand correspond to less than 20% of the earnings so hopefully there will be room for improvement now that they have started to pay some dividend out.

Conclusion: Graham says yes to Kernel but I do not. The P/E and P/B are excellent and the ROE and dividend are ok but their growth has by the look of it hit a wall and for this reason I do today not look upon Kernel as an interesting investment to step into. I am however a shareholder in Kernel and will remain as such for the time being but I have no plans of increasing my holding.

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