NEW YORK (TheStreet) -- Kellogg Co. (K - Get Report) , maker of breakfast cereals and other packaged food, is seeking to buy a majority stake in Egypt's Bisco Misr, a confectionery-maker in the most populous Arab country, Bloomberg reports.
Bisco Misr said in a statement it agreed to a due diligence by Kellogg before a possible acquisition of at least 51%. That's the third due diligence request Bisco Misr received this year after private equity firm Abraaj Group and Saudi Arabia's Savola Group made similar moves, Bloomberg said.
"Whoever wants to get exposure into this market, it would like to look at someone like Bisco Misr," Allen Sandeep, Cairo-based director of research at Naeem Brokerage, said. "With a market that has a population of 90 million, you look at any sub-segments within the consumer and food sectors and and there is massive potential."
Bisco Misr, founded in 1957, reported a profit of 5.5 million Egyptian pounds ($769,000) in the second quarter compared with 13.4 million pounds a year earlier. It previously refused two other takeover bids, Bloomberg noted.
Shares of Kellogg closed at $64.97 on Friday.
TheStreet Ratings team rates KELLOGG CO as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate KELLOGG CO (K) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its notable return on equity, good cash flow from operations, increase in stock price during the past year and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Food Products industry and the overall market, KELLOGG CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has slightly increased to $386.00 million or 5.17% when compared to the same quarter last year. In addition, KELLOGG CO has also modestly surpassed the industry average cash flow growth rate of 2.25%.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- 42.52% is the gross profit margin for KELLOGG CO which we consider to be strong. Regardless of K's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 8.00% trails the industry average.
- K, with its decline in revenue, slightly underperformed the industry average of 2.7%. Since the same quarter one year prior, revenues slightly dropped by 0.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: K Ratings Report