Indonesian palm oil producer M.P. Evans Group PLC (LON:MPE) has received the support of brokers despite poor weather and weak prices hitting the company’s output in the first half of 2016.
The “exceptional dry weather” led to a 9% fall in crop volumes, which meant profit from continuing operations also saw a year-on-year fall of 4%.
Palm oil prices were also weak in the six months to June, starting out at the “low level” of US$580 per tonne.
Despite this, MP Evans managed to turn an increased profit for the period after it sold its stake in Australian cattle company NAPCo.
The company said both the palm oil price and the weather staged recoveries as the firm moved into the second half of the year, “which augurs well for the group’s new, increased focus on palm oil”.
And brokers seemed to agree.
Both finnCap and Peel Hunt were upbeat about the prospects of MP Evans and the industry as a whole.
Peel Hunt’s Charles Hall claimed that the shares are “fundamentally undervalued” when compared to some of its peers.
Hall added: “MP Evans is an attractive way to play the recovery in the palm oil market, given its industry leading metrics and growing volumes as well as its US dollar revenue stream which is now more valuable in sterling terms.”
Likewise, finnCap analyst Raymond Greaves said he feels MP Evans is a “growth/ value play” and reiterated the broker’s ‘buy’ recommendation and 565p target price.
Greaves said he expects “substantial output growth to come to the end of the decade”, pointing to MP’s maturing estate and the fact a new mill is in operation.
Shares were up 3p, or 1%, to 438p.