Small-cap round-up featuring Dekel Agri-Vision and DWF Group

Dekel Agri-Vision (LON:DKL) – sustainable growth could double share price

Earlier this week this West Africa-based palm oil and cashew nut production and processing group declared its Update for July. It was really quite bullish with the group reporting that the crude palm oil (CPO) prices were very strong indeed. The monthly High in July was €949 per tonne, which was a staggering 89% above the average price in August last year.

I understand that it has gone even stronger this month and is now sitting at a ten-year high of around €1050.

That is good news for this early-stage production group. It ramped up its sales in July by some 67.5% while processing performance remains steady. It sold a total of 3047 tonnes of CPO in July.

Dekel ‘s Executive Director, Lincoln Moore, in the Update stated that “Global CPO prices continue to remain strong on the back of tight global supplies. We remain optimistic that prices should continue to be robust for the foreseeable future which bodes well for the remainder of our current low season and next year’s high season.”

The group is a multi-project, multi-commodity agriculture company with a portfolio of sustainable projects in Côte d’Ivoire at various stages of development.

It has a fully operational palm oil project in Ayenouan where fruit produced by local smallholders is processed at the company’s 60,000 tonnes per annum crude palm oil mill.

The company’s interesting cashew processing project in Tiebissou has suffered some delays in its commissioning, which is now expected to be next month.

Lincoln Moore stated that it “while it has taken longer than we had hoped, we remain well placed to be fully operational shortly and be well positioned to scale up production in 2022, which we expect will lead to a material step in group revenue.” 

Analyst Theo Bache at Arden Partners is currently estimating that the year to end December will see group revenues rise significantly from €22.5m last year to €35.9m, sufficient to turn the group around from the pre-tax loss of €2.1m to a profit of €0.2m this year.

For next year he goes for revenues of €45.2m and profits of €2.1m.

Although still very early in the group’s development he sees 2023 sales of €56m, then €70m in 2024. Profits in the same period could jump to over €5m, then up to €9m.

Arden Partners rate the shares, currently 4.8p, as a ‘buy’ looking for them to rise to 9.5p in due course.

They are a very strong hold as the group takes advantage of the higher prices for the world’s favourite vegetable oil.

Its shares were trading at 6p in January and I believe that they will be there or above within months.

(Profile 23.09.20 at 2p set a Target Price of 3.5p*)

DWF Group (LON:DWF) – strong demand for the shares presages a big rise

On Wednesday of last week, a number of the partners of this legal and business services group placed 13.34m shares (roughly 4.1% of the firm’s equity) at 102p each. It was a significantly oversubscribed transaction with both new and existing investors clamouring to get the stock.

And who can blame them?

The group, which floated in March 2019, has offices and associations across the globe.

It recorded £338.1m of revenues and declared an adjusted pre-tax profit of £34.2m during the year to end April. This was worth 7.4p per share in earnings and covered a 4.5p dividend.

For this current year, analysts Mike Allen and Rachel Birkett at its brokers Zeus Capital estimate £364m revenues, £41.1m profits, 9.9p earnings and a 5.9p dividend which making that 102p price look very attractive.

That is obviously why the shares have improved subsequently and now sit at 112p.

Do I see them going even higher? Oh yes indeed. I think they will be heading up to 150p and beyond in due course.

DWF is undervalued relative to its sector and offering good strong upside potential.

(Profile 01.06.20 at 67p set a Target Price of 100p*)

MP Evans (LON:MPE) – a growing share price

The Indonesian sustainable palm oil producer has now commissioned its fifth mill, a 60-tonne per hour facility at its Bumi Mas estate in East Kalimantan.

This new mill, the Benuang, will bring its oil-extraction in-house rather than sending it out to third parties.

Analysts Raymond Greaves and Michael Clifton at finnCap, the group’s joint brokers, have raised their estimates significantly due to the increase in CPO prices.

They are now looking for $242m revenues for this year to end December and adjusted pre-tax profits of $58.7m, generating earnings of 76.9cand covering a 42c dividend per share.

The brokers believe that MP Evans should be considered a ‘world class’ operation and they rate the shares, currently trading at 716p, as undervalued and maintaining their 1000p forecast.

In the last few months, the group’s shares have been up to 764p and I expect they will be up there again and even higher very soon.

(Profile 07.04.20 at 540p set a Target Price of 700p*)

RPS Group (LON:RPS) – climate changing

This multi-sector global professional services group saw its revenues stand almost still in the first half of the current year. The company reported £233.5m of fees for the six months to end June against £232.4m previously in the comparative period.

However, despite Covid-19, their margins improved substantially. This lead to them showing a 128% increase in adjusted pre-tax profits at £9.8m versus £4.3m in the first half of last year.

For the full year analyst Joe Brent, at its brokers Liberum Capital, sees £492m revenues, £21m profits and 5.48p in earnings per share.

Accordingly, he has increased his price objective after this Wednesday’s interim results statement from 110p to 125p.

I do rate the prospects for RPS as the climate changes. Its shares at 108p have a lot further to climb yet, but they certainly have global appeal.

(Profile 05.05.21 at 88p set a Target Price of 110p*)

Secure Trust Bank (LON:STB) – impaired to create value

This specialist banking outfit declared a record first half trading performance for the six months to end June.

The group’s statutory pre-tax profits rose by an impressive 502% to £30.7m and earnings leapt 564.3% from 21p to 139.5p per share.

All this was just by the half-way point.

Pedro Fonseca and Andrew Mitchell, analysts at Edison Investment Research, estimate pre-tax profits for the year of £47.9m against £20.1m previously, with earnings more than doubling from 85.2p to 211.9p per share and covering a 53p dividend.

They were impressed enough, at the group’s treatment of its impairment reversions in its motor finance and retail finance segments to raise their ‘fair value’ estimate to 2234p per share.

With the group’s shares trading at around the 1375p level, they look to be an attractive purchase ahead of its Q3 Trading Update due in October.

(Profile 12.04.21 at 1210p set a Target Price of 1500p)