Dekel Agri-Vision: TP upgrade following excellent HY production update

  • Dekel Agri-Vision have published their June production Update bringing about a half year summary, the strongest in the history of their listing. In line with the very impressive high season and pricing environment, we have updated our model to reflect increased average prices secured, resulting in an increased target price to 9.5p and at the current price of 5p this represents a 90% indicative upside.
  • June Trading Update. Fresh fruit bunches (FFB) processed were up 23.10% YoY at 11,839MT. CPO production was up 12.6% YoY at 2,638MT. CPO sales were up 97.30% YoY to 4,822MT.
  • The average CPO price per tonne for June 2021 was €915/MT, up 82.3% YoY. PKO production was down -8.9% YoY at 195MT. Dekel continue to hold inventory of both PKO and PKC which they sell into their market as the leading Rotterdam price rises. On this basis, PKO sales were nil for the month. PKC production was down -31.5% at 326MT and PKC sales was down -59.6% at 228MT. Average PKC price per tonne was up 35.6% at €80.
  • Key model changes include: a revised average exchange rate for 2021, an increase in FFB processed to 175,000 from 170,000. Furthermore, we have increased the average selling price for 2021 of CPO to €775 EUR to reflect the strong pricing environment which Dekel continue to benefit from. Our model now reflects a slight hike in depreciation given some capex additions. Dekel benefit from the useful life of their equipment far exceeding the depreciation schedule.
  • On our DCF sum of parts valuation we value the company at 9.5p per share and reiterate our buy recommendation. We believe that when the imminent cashew nut plant commences throughput, the market will recognise the value of strong diversification as Dekel ramps up cashew revenues. The stock yields 23% FCF in 2022 on our conservative forecasts with increases in cashew processing utilisation to come online later this year which will drive value. Reiterate strong buy rating.
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