MARKET DEVELOPMENT
DekelOil on Fast Track to Revenues
DekelOil on Fast Track to Revenues
23/05/2013 (Proactive Investors UK) - Palm oil specialist DekelOil only floated in March so investors might be forgiven for not realising the group is only eight months away from producing revenues.
Broker Optiva Securities notes that the path for many palm oil companies from development to full production is a long one, lasting anywhere between six to eight years, because of the long maturation period for palm oil plants.
DekelOil has bypassed all that waiting around for its crops to mature by sourcing its crop from existing palm oil smallholdings in the Cote D’Ivoire, meaning the company should start churning out cash by the end of the year, when its extraction mill has been built.
“The construction of the mill is on schedule to be completed by the end of this year, which at full capacity will be capable of processing 70,000 tonnes per annum of palm oil. The installation and project timing risks are very low, with the mill being constructed by Modipalm, an experienced and well respected international engineering company,” Optiva said.
The broker reckons that a full year of production in 2014 should see DekelOil grinding out revenues of €9.96mln, leading to forecast underlying earnings (EBITDA) of €1.9mln in 2014, rising to €5.9mln in 2015 when revenues are projected to rise to €20.0mln.
“Moreover, a favourable tax holiday in Cote D’Ivoire for the first 15 years of operation will help maximise returns for shareholders,” the broker notes. Expect Google and Amazon to be looking into opening offices in Cote D’Ivoire any day now ...
Optiva has a ‘buy’ recommendation on DekelOil with a price target of 1.63p, and believes the company is undervalued, especially in relation to similarly rated peer Equatorial Palm Oil (LON:PAL), which, unlike DekelOil, appears to be several years away from achieving profitability, in Optiva’s view.
The price target has been computed using what the broker believes is a modest crude palm oil (CPO) price of US$800 per tonne (p/t), which is less than the US$850 p/t the commodity is trading at in Rotterdam.
“A higher CPO price of US$900 for example, would move the risked and discounted target price to 2.01p (3.45p un‐risked). A risked and discounted base value of 1.63p per share provides investors with a potential 67% upside from the current share price of 0.98p,” the broker notes.
Working with the 5,000 or so smallholders signed up by Dekel is just one leg of the plan. It is also in the process of establishing its second project in Guitry, 180km from the coast where it holds rights over 24,000 hectares of land suitable for oil palm development.
Optiva’s valuation of the company takes no account of the project at Guitry.
Broker Optiva Securities notes that the path for many palm oil companies from development to full production is a long one, lasting anywhere between six to eight years, because of the long maturation period for palm oil plants.
DekelOil has bypassed all that waiting around for its crops to mature by sourcing its crop from existing palm oil smallholdings in the Cote D’Ivoire, meaning the company should start churning out cash by the end of the year, when its extraction mill has been built.
“The construction of the mill is on schedule to be completed by the end of this year, which at full capacity will be capable of processing 70,000 tonnes per annum of palm oil. The installation and project timing risks are very low, with the mill being constructed by Modipalm, an experienced and well respected international engineering company,” Optiva said.
The broker reckons that a full year of production in 2014 should see DekelOil grinding out revenues of €9.96mln, leading to forecast underlying earnings (EBITDA) of €1.9mln in 2014, rising to €5.9mln in 2015 when revenues are projected to rise to €20.0mln.
“Moreover, a favourable tax holiday in Cote D’Ivoire for the first 15 years of operation will help maximise returns for shareholders,” the broker notes. Expect Google and Amazon to be looking into opening offices in Cote D’Ivoire any day now ...
Optiva has a ‘buy’ recommendation on DekelOil with a price target of 1.63p, and believes the company is undervalued, especially in relation to similarly rated peer Equatorial Palm Oil (LON:PAL), which, unlike DekelOil, appears to be several years away from achieving profitability, in Optiva’s view.
The price target has been computed using what the broker believes is a modest crude palm oil (CPO) price of US$800 per tonne (p/t), which is less than the US$850 p/t the commodity is trading at in Rotterdam.
“A higher CPO price of US$900 for example, would move the risked and discounted target price to 2.01p (3.45p un‐risked). A risked and discounted base value of 1.63p per share provides investors with a potential 67% upside from the current share price of 0.98p,” the broker notes.
Working with the 5,000 or so smallholders signed up by Dekel is just one leg of the plan. It is also in the process of establishing its second project in Guitry, 180km from the coast where it holds rights over 24,000 hectares of land suitable for oil palm development.
Optiva’s valuation of the company takes no account of the project at Guitry.