logo-loader

VSA CAPITAL MARKET MOVERS - DekelOil

no_picture_pai.jpg

VSA Morning Agri Comment, 21/12/18

PDF Version

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

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


DKL Takes 43.8% Stake in Cashew Project

West African agricultural company DekelOil Public (LON:DKL) has taken a 43.8% equity stake in the 10,000tpa (expandable to 30,000tpa) Tiebissou cashew processing project in Cote d'Ivoire.

  • Consideration to be satisfied via the issuance of DKL shares at 4.5p per share, a 46% premium to its last closing price
  • Implied current valuation of €6m
  • Retains an option to acquire a further 20.5% interest on same terms as original option agreement signed on 26 June 2018

VSA Comment

The Tiebissou project is scheduled to become operational in early 2020 in time for the Côte d’Ivoire cashew season that typically starts in February and ends in June. Assuming DKL exercises its option to take majority control, this will be its second majority-owned operational project in Côte d’Ivoire.

With this equity investment, DKL is now sharing some of the development risk. However, it believes that this is minimal given senior management have been appointed, a 13-year tax exemption has been granted, key construction contracts are now in place and project debt financing has been secured (meaning no material cash contribution will be required by DKL for the project).

The original option agreement valued the project at a minimum of €18m once operational with the option only exercisable from H1 2021. With cashew processing facilities typically valued at around US$1m per 1,000tpa capacity, we believe this valuation seems fair (for a 10,000tpa-30,000tpa facility).

DKL reports that PKF Littlejohn LLP believes that the valuation of this specific transaction (€6m) "appears reasonable and on an arm's length basis" and this was supported by independent NED opinion and a recent independent investment into the project by an unrelated investor.

As we outlined in our initiation report on DKL, this cashew project will provide DKL with sensible diversification given its expertise in the processing of agricommodities, smallholder relations and operating in-country.

We estimate the project could deliver an additional c€3m in attributable profit to DKL by 2022 (depending on its final equity stake when operational).

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

NWF Group

74.83

153.50

4.00

+2.7%

Devro

264.68

158.60

1.60

+1.0%

Eden Research

25.07

12.10

0.10

+0.8%

 

Fallers

Market Cap (£m)

Last Close (£p)

Price Movement (£p)

% Chg

Plant Health Care

17.20

9.95

(0.50)

-4.8%

Anglo-Eastern Plantations

236.23

596.00

(25.00)

-4.0%

Genus

1,414.08

2,180.00

(74.00)

-3.3%


 

 

Add related topics to MyProactive

Create your account: sign up and get ahead on news and events

NO INVESTMENT ADVICE

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is...

FOR OUR FULL DISCLAIMER CLICK HERE

Watch

Full interview: Scancell back in the clinic with a phase II trial of its...

Scancell Holdings PLC's (LON:SCLP) Cliff Holloway tells Proactive London's Andrew Scott they've begun the UK arm of the phase II trial of its flagship skin cancer treatment. The trial is testing the safety and efficacy of SCIB1 in metastatic melanoma patients who are also receiving Merck’s...

2 hours, 8 minutes ago

RNS

Holding(s) in Company

3 hours, 25 minutes ago

Holding(s) in Company

1 week, 4 days ago

Holding(s) in Company

1 week, 4 days ago

Fundraising Update

1 week, 5 days ago

Result of AGM

3 weeks, 5 days ago

AGM Statement

3 weeks, 6 days ago

Placing Results

3 weeks, 6 days ago

5 min read