TMF, Only Just Getting Started30 Jun 2015 16:12
Obtala Resources Plc’s Growth Is Only Just Getting Started
http://www.fool.co.uk/investing/2015/06/30/obtala-resources-plcs-growth-is-only-just-getting-started/
Obtala Resources (LSE: OBT) is one of the few direct plays on Africa’s rapidly changing economy.
A vertically integrated agribusiness, timber and retail company, Obtala is an odd collection of businesses. Although as a group, this motley collection of businesses spread across several countries, is starting to yield results.
For the year ended 31st December 2014, Obtala’s sales increased by 271% to $2.63m. The group’s gross profit margin hit 49.4%, and group cash leaped by 54% to $5.1m.
However, the group reported a loss of $21.6m for the period as it was forced to take a paper loss on the disposal of its share of Paragon Diamonds Limited. The sale of the Paragon holding was part of Obtala’s strategy to concentrate its efforts on the building market, merging agribusiness and timber operations.
Bright prospects
Obtala may be a minnow at present, but investors shouldn’t overlook the company’s bright outlook.
Obtala is in the process of constructing an Africa-wide conglomerate, and, of course, this will take time. Nevertheless, last year the group made solid progress on its development plan.
For example, in late 2014 the company concept to enter the retail market under the African Home Stores banner. The company acquired a 72.69% controlling interest in Lifes’ Comfort Solutions Limited a private Lesotho registered company, which operates five departmental home solution retail outlets. Since the acquisition, the group has opened one more store and is evaluating three more potential sites.
Meanwhile, in Mozambique, Obtala is developing a timber business to provide materials for the country’s construction industry. This asset in itself is expected to be highly profitable for the company.
An independent report has placed a net present value on the timber concessions of $161m using a 12% discount rate. Management recently announced that they were accelerating plans to increase timber production.
And Obtala’s last core business is fruit and veg farming, as well as processing in Tanzania. Obtala is currently awaiting to achieve certain levels of international food and safety accreditation and certification before it can commence the export of its products from this region.
The process should be complete this year.
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