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Monday, June 27, 2022

Attack on Okomu Oil Not Expected to Harm Operations Long Term

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Okomu Oil Palm Plc last week 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 by gunmen on Tuesday, February 1st, 2022.

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 90ha 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’s operations are on gear with minimum disruptions.

“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,” Meristem Securities analysts said in a recent note.

The company’s rubber sales only contributes an average of c.15% to the firm’s total revenue.

Meristem notes that 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 (+12.50%YoY) and bottom-line (+97.84%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 1.59%, 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 NGN158.02- an upside of 23.64% from its current price of NGN127.80 as at 4th February, 2022,” Meristem said.

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