Okomu, Presco shine amid global palm oil crisis
Okomu Oil Palm Company Plc and Presco Plc, Nigeria’s biggest palm oil producers, are rallying amid the tight global palm oil supply, which has spurred increased sales for the pair.
The share prices of both companies combined are up 82 percent, taking their market capitalisation to N405 billion as at May 13, compared to N223 billion at the beginning of the year. While Presco’s share price has gained 128 percent, Okomu is up 51.4 percent.
The rally in shares can be attributed to the positive financial performances of the firms and the tight global supplies of palm oil, spurring local palm oil producers to bridge the gap.
Okomu Oil recorded an increase in sales by 63.2 percent to N20.5 billion from N12.6 billion in 2021.
It recently released its first-quarter financial report, which shows it recorded a 31.8 percent increase in export sales to N1.6 billion from N1.2 billion. The local sales grew by 66.6 percent to N18.9 billion in the first quarter of 2022 from N11.3 billion in 2021.
Cordros Research attributed the strong sales to the global price hike in crude palm oil (CPO) price.
“We attribute the growth in revenue to the surge in CPO price (Average CIF Rotterdam CPO price: USD1,569.18/mt in Q1-22 vs USD1,087.18/mt in Q1-21) influenced by the Russia/Ukraine crisis and sustained supply issues in the international market,” Cordros said in a statement emailed to its clients.
Data sourced from the Nigerian Exchange Limited showed that Okomu Oil grew its profit by 80 percent to N9.5 billion in the first quarter of this year from N5.2 billion in the same period a year earlier.
Presco’s Q1 2022 financial statement was not available as of Friday. Its results for the year ended December 2021 showed a rise in profit to N18.86 billion from N5.26 billion in 2020.
Its revenue grew 97.5 percent to N47.2 billion in 2021 from N23.9 billion in 2020.
Okomu saw its profit climb to N11.54 billion in 2021 from N2.94 billion in 2020. Its revenue jumped to N37.4 billion in 2021, a 60 percent increase from N23.4 billion in 2020.
A compelling investment case
A N1 million investment in Presco’s stock on the first trading day of January would be worth N2.28 million, implying a gain of N1.28 million.
In Okomu’s case, the N1 million investment would be worth N1.5 million, implying a gain of N514,000.
Okomu has a price-to-earnings (PE) ratio of 11.31x, which means investors pay N11.31 for each naira of profit earned by Okomu, while Presco has a PE ratio of 9.44x. Both companies are cheap relative to global peers.
For instance, Sime Darby Bhd, the largest listed palm oil company globally, is priced higher than Okomu and Presco at 14.76x.