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It is glaring that the impressive figures of Okomu Oil Plc and Presco Plc have buoyed investors’ confidence so far and the good tidings is that analysts are sanguine the top palm oil producers will maintain profit growth this year.
The decision of the Central Bank of Nigeria (CBN) to blacklist firms that import palm oil and the border closure by the government was a boon for these two dominant producers as competition dwindled.
Both have outperformed the NGXASI so far, and they are among the star performers of the NGX 30 index (lists of the most liquid and capitalised firms).
Pesco and Okomu shares have gained 84.51 percent and 36.51 percent respectively, which outperformed NGX ASI which is up 24.53 percent, according to data from the exchange.
These stocks have become heaven assets because of their strong earnings and margins even amid rising inflation, currency volatility, and global geopolitical uncertainties.
Analysts optimism of increases in profitability stems from levels, a better pricing environment and robust local demand of Crude Palm Oil (CPO) compared to 2021.
For the rest of 2022, a moderation is expected on CPO prices. On the global front, effective from May 23rd this year, the Indonesian Government lifted the export ban on Crude Palm Oil. Accordingly, this should result in an increased availability of CPO inventory in the global market.
“Thus, easing the pressure on palm oil prices going forward, as the country contributes more than half of global oil palm production. In the domestic industry, we expect increased inventory levels of oil palm in the second half of the year (the typical harvest season) to result in slower price increase,” said analysts at Meristem Securities.
OKomu and Presco collectively grew net income by 68.82 percent to N15.38 billion as at March 2022 from N9.11 billion as at March 2021.
They command more money for higher future earnings and investors anticipate more growth in the future.
Okomu has price to multiples of 16 that is higher than the 12 times the NGXASI index,