Equatorial Palm Oil (EPO) shares have been on a rollercoaster ride since they joined Aim in February last year, but since the year-end the company made it first sales and has plans to rapidly expand its plantations in 2011.
In May, EPO sold its first palm oil, which followed the completion of a state-of-the-art mill - Liberia’s first - on the company’s Palm Bay Estate. Daily production of crude palm oil (CPO) is expected to reach 15 tonnes as the mill moves towards full capacity during July. The initial output, though modest, could conceivably result in an operating profit this year, according to chairman Michael Frayne..
EPO has already successfully re-habilitated 3,500 hectares of existing, ready-to-harvest oil palms and expects to plant 1,200 hectares this year. The rate of new plantings is expected to accelerate to meet EPO's target of having 50,000 hectares of plantations within its first 10 years. Ongoing capital expenditure will be funded from existing cash reserves and low-cost finance arranged through 50:50 joint venture partner BioPalm, which is a subsidiary of India’s Siva Group.
Prior to these results, a discounted cash-flow model by broker Mirabaud put a core valuation on EPO of 38p a share, based on the eventual utilisation of 101,627 hectares and a CPO price of $750-a-tonne.
| EQUATORIAL PALM OIL (PAL) | ||||
|---|---|---|---|---|
| ORD PRICE: | 19.75p | MARKET VALUE: | £25m | |
| TOUCH: | 19-20p | 12-MONTH HIGH: | 34.5p | LOW: 11p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 11p | NET CASH: | $6.8m | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | nil | -1.41 | -4.6 | nil |
| 2009* | nil | -1.48 | -4.6 | nil |
| 2010 | nil | -4.40 | -4.7 | nil |
| % change | - | - | - | - |
*Restated £ = $1.638 | ||||
