The shares of Okomu Oil Palms Plc recorded remarkable decline on the Nigerian Exchange Limited (NGX) as equity investors price-in possible risks to earnings of company following the recent attack on its rubber plantation.
The share price which had remained at N142 per share since January suddenly dropped to new low of N127.8 as at February 8.
Okomu Oil Palm Plc had released a notice to the investing public, confirming reports that the firm’s plantation located at Okomu-Udo, Ovia South-West Local Government Area in Edo state was attacked in the early hours of Tuesday, February 1 by gunmen armed with AK-47 riffles.
The report, which was filed with the Nigerian Exchange Limited, further explained that this attack led to the death of an employee, setting ablaze of three excavators as well as 90 hectares of rubber plantation.
However, the company’s management stated that it is currently in collaboration with the Police and other security agencies to curb these insecurity issues and prevent any of such occurrences in the future. Accordingly, the firm said its operations are on gear with minimum disruptions.
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In full year ended December 2021, the company grew its turnover by 59.8 percent to N37.4billion from N23.4billion in 2020. Profit after tax was N14.04billion in 2021 from N7.78billion in 2020, representing year-on-year (YoY) increase by 80.46percent.
“While the incident may cause agitations from inhabitants of the attacked community and concern among investors, we do not expect a major impact on the firm’s operations. The company’s rubber sales only contribute an average of circa 15percent to the firm’s total revenue”, said Lagos-based analysts at Meristem in their February 8 note.
According to the analysts, “In December 2015, when the firm was faced with a similar situation; losing sizable land area to wildfire and militants, the company still recorded significant increase in topline (+12.50percent year-on-year YoY) and bottom line (+97.84percent YoY) as Crude Palm Oil (CPO) sales continued to prop performance.
“Hence, while this could result in a decline in rubber revenue by as much as 1.59percent, we still expect year on year topline growth as sales from CPO alone (isolating rubber revenue) is sufficient to lift group revenue performance. Consequently, the impact of the incident is negligible on our expectations for earnings, and we maintain our 2022TP at N158.02- an upside of 23.64percent from its current price of N127.80 as at February 4, 2022”, Meristem analysts further said.
