Crown Berger is a Kenyan paint manufacturing company established in 1958 with an annual turnover of KES 2.6 billion and the capability of producing up to 1.5 million litres of paint per month. The company is listed on the NSE under the Main Investment Segment in the Construction and Allied category and in the last few years has expanded its operations from Kenya to the greater East African and COMESA region.

For the financial period ended 31^st December 2011 the company reported a 41% increase in profits to KES 129 million from KES 91.42 million the previous year.

Sound expansion strategy

This year the company entered into two distribution partnerships. One with a South African company Free World Automotive Coatings to distribute the firm’s automotive paint products another distribution partnership with the American company DuPont Chemicals to supply the paint additive Teflon that enhances the quality of paint. These partnerships are aimed not only at enabling the foreign companies to penetrate the local market but strengthen Crown Berger’s presence in the market and possibly give it an edge over other players in the industry such as Basco Paints and Sadolin Paints. This makes Crown Berger an attractive share as these partnerships represent a sound expansion strategy that may profit shareholders in a few years once the new products have fully assimilated into the market.

Share performance

At the pesatalk we have noted that over the course of the last two months the share has been quite active registering its presence in both the highest gainers and highest losers. This means that the Crown Berger share is a volatile one capable of gaining or losing as much as 9.17% of its value on any given day.

Below is a graphical illustration of the share’s performance:

[caption id="attachment_7053" align="alignnone" width="466" caption="Image sourced from www.bloomberg.com"][/caption]

As you can see the share has hovered between KES 28 and KES 26 over the last two weeks.

According to the aforementioned financial results, the total assets of the company stand at KES 2,215,352,000 and the number of listed shares on the NSE stands at 23.73 million. Assuming that the total assets are net of depreciation and intangible assets we can approximate the Net Book Value of the company to be:

2,215,352,000/23,730,000=93.356

This means that as per the financials of the company the share price should be around KES 90 per share. This is not the case as the current price is KES 26 meaning that as many other shares on the bourse, the share is grossly undervalued.

So despite the volatility of the share investors should consider it as a sound share to purchase.