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BOPP shares promising

Oil

Thu, 7 Mar 2013 Source: Daily Guide

Benso Oil Palm Plantation (BOPP) is expected to exhibit sustained and improved fundamental performance this week.

Frontline Capital Advisors, stock analysts, which indicated this in its recent report on the performance of stocks on the Accra Bourse, called on investors to opt for BOPP’s shares.


“Coupled with exceptional management, an increase in CPO prices would bode well for BOPP. We anticipate gross profit to grow by 59 percent and PAT to grow by an estimated 50 percent.


“We upgrade our recommendation of BOPP to a ‘buy’ based on a 12-month fair value price target of GHS3.35. This represents 45.66 percent capital gain in local currency terms. The stock’s five-year annual return of 22.87 percent outperforms that of the market which has generated a return of 5.99 percent for the same period. The shares are currently trading at 4.0x forward earnings, below a five year average of 6.9x.On a forward P/B basis; the shares are trading at 1.4x forward book value. Applying both P/E and P/B valuations, we arrive at a target price of GHS3.35,” the stock analysts said.


The stock analysts commented: “Despite short-term volatility in the prices of palm oil, we forecast worldwide demand to increase significantly in the long term causing upward pressure on the price of the commodity. This would in effect have a positive effect on the performance of the company,”


The increase in revenue for 2012 of about 17 percent can be attributed to increased output due to greater efficiency in the production process, as crude oil prices in 2012 increased about 30 percent from $1,020.54 at the beginning of the year to $713.94 as at year end.

Cost of sales increased by 14 percent from the prior year (2011). As a percentage of sales, cost of sales dropped from 68.2 percent to 66.2 percent. The drop in this ratio was due to the fact that turnover increased by more than proportionate amount compared to cost of sales.


Both profit margin figures were up in 2012. Gross profit margin increased by 3 percent to 38 percent whilst net profit margin increased by 5 percent to 33 percent.


Worldwide demand for palm oil and its related products could lead to sustained rise in CPO prices and this would have a significant effect on the operations of BOPP.


Potential appreciation of the domestic currency could harm the operations of BOPP.


The stock, trading at the upper band of it Bollinger and also trading at a RSI of 94.951, confirm the bullish sentiment surrounding the stock.

From a trading point of view, we can expect contrarian investors to take some profit at this point though we recommend investor ride the bullish wave, they indicated.


Formally listed on the GSE in 2004, Benso Oil Palm Plantation, a subsidiary of Wilmar Africa Limited, is involved in the manufacture of oil palm production and processing.


It produces oil such as RBD Palm Oil, RBD Palm Olein, and vegetable oil in addition to controlling a large part of the market in West Africa. The company is also involved in the refinery of fats and oils.

Source: Daily Guide