Ghana: Benso Oil Palm Plantation Limited, Year ended December 31, 2011

Financial Performance review
Benso Oil Palm Plantation Limited , reported an 80% increase in revenues from GHc 19.4 Million to GHc 34.8 Million. Profits after tax rose by 266% from GHc 2.7 Million to KES 9.8 Million.

The net profit margin rose to an impressive 28% compared to 14% in the prior year.

Operating environment and outlook
Benso’s growth in revenues was driven primarily by an increase in Crude Palm Oil Production and an upward trend in prices.

Wilmar International Limited, a Singapore headquartered agribusiness, acquired a majority of Benso’s shares from Unilever in early 2011. Wilmar’s core business is palm oil cultivation and processing; cost efficiencies enacted by Wilmar are already paying off as evidenced by the sharp rise in the net profit margin.

The good weather experienced in 2011 and the high world market price for palm crude oil are expected to continue into 2012. The operational efficiencies enacted by the new majority shareholder are likely to be sustained. The company is therefore likely to post a strong performance in 2012.

Investment analysis/Recommedation
The company’s share price closed (on February 14, 2012) at GHc 1.77; an all time high. The last period the company traded over GHc 1.00 was in the fourth quarter of 2008 when it a high of GHc 1.30 in October 2008.

With earnings per share of GHc 0.2808, the company is trading at a PE ratio of 6.3. On this basis alone the share is cheap.

The company has zero bank debt and has a huge and growing cash balance; the cash balance rose to GHc 7.47 Million up from GHc 2.5 Million in the prior year.

At the current market capitalization, the price book to value is 2, a fairly reasonable figure for a company that highly cash generative.

The dividend yield is 3%. The total dividend payout is up by 60%. While this is a significant increase it is much less than the growth in profits indicating that management wants to plough back funds to grow the company.

Recommendation:
The share is a buy even after the strong rally in share price in the year to date. The company is cheap as measured by the valuation metrics above

The main challenge with the share is the very low volume of shares traded on a daily basis making it difficult to build a significant stake.

Ghana: Produce Buying Company : Year ended 30 September 2011

Analysis:

PBC recorded an impressive increase of 106% in its total revenue, having grown from 633M in 2010 to 1.3B in 2011. Though there was an equally great increase in cost of sales figure for 2011, it did not affect the profit after tax, which rose to 27.7M from the previous year’s 14.1M. However, the gross profit and net profit margins fell slightly by 1.68 and 0.16 percentage points respectively.

The company’s earnings per share rose by 96%. The share price experienced the most fluctuations in the year ended 30 September 2011, ranging between GH¢ 0.14 to GH¢ 0.30 towards the end of the financial year. The highest volume of shares traded was in September when 8.05M shares were traded, compared to normal trading of less than 200,000 shares per month. This was probably in anticipation of the announcement of good results for the concluded financial year.

PBC has a fairly low P/E ratio of 4.34, based on a share price of GH¢ 0.25 as at 19 January, 2012.

Outlook:

PBC has been experiencing high demand at the GSE following its notable financial growth over the past few years. It announced in May 2011 that it would be seeking a strategic investor to take up a 12.24% stake in order to finance its expansion projects. It also issued a statement that it would be buying more cocoa from farmers in the year, raising its purchases from 274,000 tonnes to 380,000 tonnes so as to further increase its market share to about 45%.

Like all other companies dealing in commodities, PBC felt the impact of the crises abroad but still maintained its revenue growth for the year. It enjoyed high prices from February 2011, but those dropped as the year progressed. However demand for dollars by traders had a negative impact on the local currency, causing it to drop, particularly in towards the end of 2011. Ghana enjoyed a record harvest of 1.01M tonnes in August 2011, though this figure may have been inflated by cocoa smuggled in from neighbouring countries. PBC benefited greatly from this bumper harvest.

In September 2011 PBC revealed its plans to open its US$10M sheanut processing plant under a subsidiary, PBC Shea Ltd, which was set up to diversify its operations and boost its stake in the market both locally and internationally. This is part of its Medium-Term Corporate Plan running from 2010 to 2013. The company also intends to expand further by improving its ICT facilities.