Analysts at Canaccord Genuity have repeated a 'Speculative Buy' rating and 7.00p price target on Woodbois Ltd (AIM:WBI) following the Africa-focused forestry, timber trading, reforestation and voluntary carbon credit company's third quarter update.
The broker's analysts noted that Woodbois delivered another strong quarter, with revenue of $5.8mln up 29% year-on-year and a further improvement in gross margin.
They said: "Shipping delays have notably eased and the group is now able to increase volume; conversely, there have been some delays in the supply chain for the new veneer line and this has an impact on revenue for this year."
READ: Woodbois sees record revenues and timber production
The analysts pointed out that the company's gross margin outlook is largely unchanged for the fourth quarter, thanks in part to favourable US dollar exchange rates for what is largely a non-US dollar cost base.
They said: "At $10.9mln, net debt remains well under control even at current levels of profitability and before the impact of earnings from recent investments, notably the veneer line."
The analysts added: "Although earnings for 2022E are unchanged, we are taking a somewhat more cautious view on profitability going into 2023E, in part due to the generally weaker macro environment, in part to a slower ramp-up in veneer volumes, and in part to less third-party trading volumes."
"We continue to base our 7.0p target on long-term and peer group multiples and the audited balance sheet value of the forestry assets (8.3p). We expect the group to become net profitable in 2023E. At our 7.0p target the stock would trade at 33x/21x 2023E/24E EV/ EBITDAS, which we believe is appropriate given our methodology," they concluded.
Woodbois shares closed trading on Monday at 3.40p.