Proactive Investors - Run By Investors For Investors

VSA CAPITAL MARKET MOVERS - DekelOil Public Limited

VSA CAPITAL MARKET MOVERS - DekelOil Public Limited

VSA Morning Agri Comment, 10/01/19

PDF Version

Keep reading VSA research for free – Click here for our position on MIFID2

8cca5f03-3a65-4030-b4e7-e9353ee5674b.png


DekelOil Public Limited - Q4 Production & Sales Update

Côte d'Ivoire agricultural company DekelOil Public Limited (LON:DKL) has announced a production update for Q4 2018.

  • Fresh Fruit Bunches (FFB) Collected: 24,903t, -23.1% YoY (Q4 2017: 32,364t)
  • Crude Palm Oil (CPO) Production: 5,464t, -22.6% YoY (Q4 2017: 7,055t)
  • CPO Sales: 4,950t, -24.8% YoY (Q4 2017: 6,586t)
  • Average CPO Selling Price: €517/t, -14.8% YoY (Q4 2017: €607/t)

VSA Comment

Following a 15% YoY increase in FFB collected in Q3, we were hopeful that Q4 would provide continued evidence of a strong recovery in crop levels and provide upside to our forecasts. Unfortunately, today’s data confirms that this was not the case. However, it should be noted that the comparable period appears to have been an exceptionally good quarter for cropping and Q4 CPO production was more than 15% ahead of production in Q4 2016.

Over the full-year, DKL collected 146,036t of FFB and produced 33,077t of CPO, in-line with our forecasts of 147,525t and 33,341t, respectively. Palm kernel oil (PKO) sales (2,861t sold vs. 2,124t estimate) and palm kernel cake (PKC) sales (3,795t sold vs. 2,950t estimate) were significantly higher than we had estimated.

Pricing premiums over the European benchmark in H2 (+19% in Q4, +11% in Q3) allowed DKL to secure an average FY CPO selling price above our forecasts (€543/t vs. €523/t estimated). Along with the higher-than-forecast PKO and PKC sales, this may provide slight upside to our financial forecasts for FY 2018 (revenue of c€20m and net loss of c€3m). Given strong regional demand, we expect premium pricing to persist through FY 2019.

In terms of CPO pricing outlook, the European benchmark price has increased more than 20% since mid-November to US$535/t (€465/t). Although South East Asian palm oil stocks are currently high, we are now entering the low production season for that region, with Chinese and Indian demand expected to increase, and Malaysian and Indonesian domestic demand also likely to rise as higher biodiesel blending regulations are rolled out. In addition, the US National Oceanic and Atmospheric Administration has put a 90% chance of an El Niño forming in Q1. A strong El Niño has the potential to depress palm oil production and boost pricing.

On the bearish side, recent crude oil price falls have eliminated the premium of gasoil over Malaysian CPO (having been US$200/t+ in October). This will reduce discretionary palm-based biodiesel demand and could delay the implementation of further biodiesel blending regulations.

With 2018 now behind it, attention will turn to 2019, particularly with regards to the upcoming high season. In anticipation of this, DKL has established a fourth FFB collection centre near to its mill. Although never guaranteed, low production years are often followed by high production years, so we are hopeful that H1 2019 will be a positive one for DKL in terms of production. We look forward to a Q1 2019 production update in early April to confirm this either way. Recent CPO price increases, if sustained, could also help deliver an improved financial performance in FY 2019.

We maintain our BUY recommendation and target price of 12p.


Risers and Fallers (Last Close)

Risers

Market Cap (£m)

Last Close (£p)

Price Movement (£p)

% Chg

Company Name

 

+/-

+/-

+/-

Company Name

 

+/-

+/-

+/-

Company Name

 

+/-

+/-

+/-

 

Fallers

Market Cap (£m)

Last Close (£p)

Price Movement (£p)

% Chg

Company Name

 

+/-

+/-

+/-

Company Name

 

+/-

+/-

+/-

Company Name

 

+/-

+/-

+/-

 

 

 

Disclaimer: This research report has been prepared by VSA Capital Limited and is solely for, and directed at, persons who are Professional Clients as defined under Annex II of the Markets in Financial Instruments Directive, Directive 2004/39/EC, or as defined in the FCA Handbook. Persons who do not fall within the above category should return this research report to VSA Capital Limited, New Liverpool House, 15-17 Eldon Street, London EC2M 7LD, immediately.
This research report is not intended to be distributed or passed on, directly or indirectly, to any other class of persons. It is being supplied to you solely for your information and may not be reproduced, forwarded to any other person or published, in whole or in part, for any purpose, without out prior written consent.
This research report is exempt from the general restriction on the communication of invitations or inducements to enter into investment activity and has therefore not been approved by an authorised person, as would otherwise be required by Section 21 of the Financial Services and Markets Act 2000 (the "Act"), as amended by The Financial Services and Markets Act 2012.
Neither the information nor any opinion expressed constitutes an offer, or an invitation to make an offer, to buy or sell any securities or any options, futures or other derivatives related to such securities.
The information and opinions contained in this research report have been compiled or arrived at by VSA Capital Limited (the "Company") from sources believed to be reliable and in good faith but no representation or warranty, express or implied, is made as to their accuracy, completeness or correctness. All opinions and estimates contained in the research report constitute the Company's judgments as of the date of the report and are subject to change without notice. The information contained in the report is published for the assistance of those persons defined above but it is not to be relied upon as authoritative or taken in substitution for the exercise of the judgment of any reader.
The Company accepts no liability whatsoever for any direct or consequential loss arising from any use of the information contained herein. The company does not make any representation to any reader of the research report as to the suitability of any investment made in connection with this report and readers must satisfy themselves of the suitability in light of their own understanding, appraisal of risk and reward, objectives, experience and financial and operational resources.
The value of any companies or securities referred to in this research report may rise as well as fall and sums recovered may be less than those originally invested. Any references to past performance of any companies or investments referred to in this research report are not indicative of their future performance. The Company and/or its directors and/or employees may have long or short positions in the securities mentioned herein, or in options, futures and other derivative instruments based on these securities or commodities.
Not all of the products recommended or discussed in this research report may be regulated by the Financial Services and Markets Act 2000, as amended by The Financial Services and Markets Act 2012,  and the rules made for the protection of investors by that Act will not apply to them. If you are in any doubt about the investment to which this report relates, you should consult a person authorised and regulated by the Financial Conduct Authority who specialises in advising on securities of the kind described.
The Company does and seeks to do business with the companies covered in its research reports. Thus, investors should be aware that the Company may have a conflict of interest that may affect the objectivity of this report. To view our policy on conflicts of interest and connected companies, please go to: http://www.vsacapital.com/policies/conflict-of-interest-policy.
Investors should consider this report as only a single factor in making their investment decision.
The information in this report is not intended to be published or made available to any person in the United States of America (USA) or Canada or any jurisdiction where to do so would result in contravention of any applicable laws or regulations. Accordingly, if it is prohibited to make such information available in your jurisdiction or to you (by reason of your nationality, residence or otherwise) it is not directed at you.

© Proactive Investors 2019

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use