Dekel Agri-Vision outlook is strong with significant upside say WHI Capital Markets

Dekel Agri-Vision

Dekel Agri-Vision (LON:DKL) is the topic of conversation when DirectorsTalk MD Darren Turgel caught up with Director Institutional Research at WHI Capital Markets, Nick Spoliar.

Dekel Agri-Vision today provided a monthly update on its production, what were the key take-aways?

Key is the fact that the lower than average FFB harvests, which the company had already updated the market about, are being offset by the excellent pricing (CPO and PKO). Management has been proactive in utilising the export market for both products – and higher than average extraction rates are a further positive. As a result, year to date performance is reported to be strong.

Secondly, in terms of the cashew project, the timing of plant commissioning is coming into clearer focus. Colour sorter and shelling machine deliveries in late May should ensure production reaches >50% of capacity by June; this will be a breakthrough moment for the company, meaning the cashew project should make a meaningful financial contribution in FY22.

How do you view the outlook for the company?

We see the outlook as strong for DKL. Prices of CPO and PKO achieved by the company should continue to rise from their high current base, as DKL exports a greater proportion of product and international vegetable oil shortages persist. We expect the ramp-up of the cashew project, despite supply chain impacted delays, to be transformative to the company’s finances as production approaches full capacity – adding a diversified revenue stream and the potential to significantly enhance earnings with no further capex. Generally of course the environment is positive for a company producing a currently supply-squeezed commodity including any form of vegetable oil.

How do you see the company in terms of fair value?

We see significant upside as cashews come through and given the overall situation for sustainable palm oil.

Dekel Agri-Vision plc (LON DKL) is an agriculture processing, logistics and farming operation located in Côte d’Ivoire.

The Company has a portfolio of projects at various stages of the development curve: a fully operational palm oil project in Ayenouan where fruit produced by local smallholders in addition to c.1,900 ha of company estates is processed at the Company’s 60tn/hr crude palm oil mill; a large scale cashew processing project in Tiebissou, which is due to commence production in 2020; and a 24,000ha brownfield development site in Guitry which is being prepared for development.

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