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DekelOil seen as a ‘buy’ after positive interim results

Cantor Fitzgerald has repeated a ‘buy’ recommendation for Dekeloil Public Ltd (LON:DKL) and increased its target price following the group’s positive interim financial results.

Analyst Adam Forsyth notes that the slight upgrade, to 24p from 23.5p, reflects a stronger Euro rather than business fundamentals nevertheless he highlights the operational improvement during the first half.

Forsyth also notes improving conditions in the palm oil market.

“DekelOil continues to see growing profitability as its palm oil mill in Cote d’Ivoire ramps up,” the analyst said.

“Today’s interims show strong progress despite weaker prices. Pricing has recovered but we think it prudent to reduce the current year forecasts to account for H1 pricing. There is no long term impact and the move in valuation is minimal.”

Interim results reveal record palm oil production

Earlier on Wednesday DekelOil revealed record half yearly palm oil production, turning out some 28,550 tonnes of crude palm oil (CPO) in the six months ended June 30.

It marks DekelOil’s first full half year producing with a new kernel crushing plant, and confirms it is operating in line with the strategy to increase sales and profitability at the Ayenouan palm oil operation in Côte d'Ivoire.

Revenue was up 23.6% to €16mln, from €12.9mln, while earnings rose 34.8% to €3.1mln.

That comes from the sale of a total of 25,225 tonnes of CPO in the six month period, and the group had 3,498 tonnes in stock at the end of the half.

DekelOil noted that its stockpile has reduced since the end of June, back to normal levels, as CPO prices have since improved.

The company also highlighted a significant transaction, in its acquisition of an additional 34.75% of its majority owned business, CS DekelOil Siva Limited. The deal effectively saw DekelOil’s stake in Ayenouan rise to 85.75%.

It means that DekelOil will keep a larger proportion of Ayenouan's growing revenue stream and cash flows and, according to the company, it can help accelerate the roll-out of its strategy to build a leading West Africa based palm oil producer.

“Together with the support we have received from our institutional cornerstone investor Miton Group, it is clear to see why we made the decision to increase our stake in Ayenouan by 34.75% to 85.75%,” said Lincoln Moore, executive director.

“We expect the impact of this transformational transaction on our financials will become more apparent in our full year results.

Moore added: “I am incredibly proud of our operations and team, which has achieved so much in the short time since our listing and which has already delivered significant profit growth and debt refinancing on more attractive terms since operations commenced at the Mill.

“Optimising these areas will be a firm focus for DekelOil in the coming months and years ahead."


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