New Britain Palm Oil (NBPO) had a record first half, thanks to bumper production levels, better extraction rates, higher selling prices and much lower costs. This resulted in pre-tax profit of $73.1m, more than double last year's $32.3m.
The company sold its crude palm oil for an average price of $935/tonne and has sold or priced forward a further 81,000 tonnes for the remainder of 2014 at an average price of $908 per tonne. However, while the outlook for palm oil demand remains robust in the long term, spot prices have fallen back to $810.
Meanwhile, speculation continues over a possible takeover, which has helped to drive the share price up to 523p. The rumour is that 49 per cent shareholder Kulim is once again trying to offload its stake and that a number of parties are interested. New Britain is subject to the Papua New Guinea takeover code, which means that an interest of more than 20 per cent in the company may only be acquired pursuant to a takeover offer open to all shareholders.
Analysts at Liberum Capital believe the stock remains undervalued, and have set a price target of 750p. Given the lack of suitable land left for cultivating palm trees, they say New Britain is a prime takeover target, particularly as it produces 'ethical' oil.
