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Double down on DekelOil
A premium-priced bid for Indonesian palm oil producer M.P. Evans (MPE:AIM) offers a positive read-across for smaller peer DekelOil (DKL:AIM), the operator and 86% owner of a profitable palm oil project in Cote d’Ivoire.
M.P. Evans has received majority shareholder support to reject (26 Oct) the £360m offer from Kuala Lumpur Kepong on the grounds it undervalues the company’s unique position and future growth potential. Given rising global demand for vegetable oils including palm oil and the scarcity of expansion land in Indonesia and Malaysia, bidders' attentions are turning towards West Africa, where DekelOil has completed the construction of its Ayenouan mill and profitability is rising.
DekelOil’s refinancing (31 Oct) of a major proportion of its debt on improved terms will pare interest costs and boost profitability further. Accordingly, Cantor Fitzgerald Europe has raised its forecasts for 2017 and beyond and upgraded its price target from 24p to 28p, implying almost 140% potential upside. For the year to December, the broker forecasts a sharp rise in pre-tax profits from €0.1m to €3.8m ahead of €7.6m PBT in 2017. (JC)
We’re staying positive on DekelOil at 11.75p for its profit growth potential and as a likely bid target.