Yesterday, DekelOil LON:DKL released its production update for the six months ending 30th June 2015. During the period, the company produced 21,836 tonnes of crude palm oil (CPO), up 53% over previous year’s overall production of 14,242 tonnes, due to strong regional demand. Production of kernel for the period was 3,733 tonnes. Sales of the CPO and the kernel stood at 19,184 tonnes and 3,760 tonnes respectively average price per tonne of £617 and £183. Further, the company reported a 24% extraction rate for CPO from 90,879 tonnes of fresh fruit bunches (FFB).
Beaufort Securities view on DekelOil : DekelOil continues to benefit from its strong logistics network around the mills, as evident from the latest production results. They utilized the crucial harvesting season (March to June) to their advantage and surpassed its own estimates and production levels of 2014. The company sold its CPO at a higher selling price as compared to CIF Rotterdam CPO prices and expects the trend to continue owing to the strong local demand for DekelOil products. In addition, another Kernel Crushing Plant (KCP) at Ayenouan remains under construction and is expected to be operational in Q4 2015. Further, West Africa seems to be a promising destination for palm oil developers and continues to attract those who are seeking future expansion. Going ahead, we expect a sharp rise in the company’s profitability due to combined production from the existing plants and the new KCP. In view of the above argument, we reiterate Speculative Buy on the stock.
Beaufort Securities acts as corporate broker to DekelOil Public Limited plc
