PAIV:Shore Capital positive about Equatorial Palm Oil's prospects
Equatorial Palm Oil (LON:PAL) has made 'excellent' progress operationally and financially in 2010, according to analyst Phill Carroll at broker Shore Capital.
The firm released its first full-year results since it listed on AIM in February 2010.
The listing raised £6.5 million which is being used to develop sustainable oil palm plantations on its 169,000 hectares in Liberia.
The company ended the year with a strong cash position of US$6.8 million, compared to US$0.1 million in 2009, having repaid all outstanding loans. Losses rose from US$1.5 million to US$4.4 million with US$1.3 million attributable to costs associated with the listing.
A highlight of the year included the construction and beginning of commissioning of a palm oil mill at Palm Bay.
Equatorial Palm Oil made the first sales of crude palm oil from the mill in May this year.
In a note to clients, Carroll said that the financial result alone did not give a true indication of the material progress the company has made during the year and in the subsequent period to date.
"In terms of the key highlights for the year, firstly, EPO (Equatorial Palm Oil) secured a cornerstone investor in BioPalm Energy Ltd, a wholly owned subsidiary of the Siva Group.
"It initially invested £5 million in May 2010 and subsequently cemented the relationship when it entered into a $60 million joint venture agreement with EPO which was consummated in February 2011 following shareholder approval in December 2010.
"Under the joint venture agreement, BioPalm contributed $22.5 million in equity and EPO via its subsidiary has contributed $7.5 million plus its land assets.
"BioPalm will also arrange and guarantee an additional loan facility of $30 million. In our view, this was a particularly positive development as it helped mitigate much of the financial risk relating to the project as well as allowing for acceleration in the existing development plans," said Carroll.
The firm's broker belives that, operationally, the key development is the construction of the 5 tonne oil mill that was inaugurated after year-end.
"This now allows the company to commence generating revenue by processing fresh fruit bunches into crude palm oil which is then sold," it said.
"In summary, we believe EPO has made significant progress in FY2010 and the company is now well-positioned both financially and operationally to continue its progress in FY2011. Therefore, we remain positive on its prospects," it added.
