RE: BEAUFORT BLURB...19 Oct 2017 13:12
Hi Phil, here is updated blurb:
Our View: Yesterday�s share price overreaction provides a buying opportunity. Agricultural harvests are never predictable and, in any case, lower anticipated Q3 production due to a relatively poor harvest in what is typically a low season in C�te d'Ivoire had already been discounted by a sharp setback in the shares from early in May. What this, nor yesterday�s hit prices-in, however, is management�s success in offsetting irregular harvest outcomes by both offering premium product quality along with advantages created by installation of a 3,000 tonnes storage facility earlier this year. This allows DekelOil to time release its volume offer to coincide with higher demand trends and upward moving prices. In managing to sell CPO at �640 for the quarter (an 11% premium to international benchmark prices), for example, it achieved total product sales for the nine-month period to 30 September 2017 in line with the equivalent period last year despite lower year-on-year Q3 production. This validates management's ongoing strategy to maximise value from each fruit processed, which will also utilise the remainder of the low season to embark on further value-adding initiatives in time for the start of the next peak harvesting period. Having proven its business plan, management is now keen to roll-out its vertically integrated model, which includes a state of the art nursery, mill, and company-owned estates, elsewhere in the region. At Guitry, operations have already formally commenced, and the Board remains in discussions to acquire an interest in Norpalm Ghana Limited (�NGL�), a vertically integrated palm oil producer in Western Ghana which has approximately 4,000 hectares of mature palm plantations under ownership and produces some 15,000 tonnes of CPO a year from a 30t/hr mill. In addition to the revenue it generates from selling this produce into the domestic Ghanaian market, NGL also operates a palm kernel oil press which produces approximately 2,000 tn of PKO. There can be no guarantee current discussions will result in DekelOil acquiring NGL, but they nevertheless demonstrate management�s confidence in its ability to replicate success already achieved. Having proven both the operating model and ability to implement it, shareholders should be reasonably confident of further progress as DekelOil seeks to transform itself into a leading West African palm oil producer. Indeed, Beaufort considers DekelOil is capable of producing as much as �2.0m free cashflow during 2017E, followed by around �5m the year after. Importantly this demonstrates management�s willingness to move its ambitious planning forward without directly exposing shareholders to a higher risk profile. Based on modestly revised 2017E and 2018E revenues estimates of �31.1m and �35.8m, delivering fully-diluted earnings 1.60p and 2.20p respectively, the shares now trade on
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