PRESCO operates in Oil Palm sector which has high entry cost and long gestation period.
PRESCO has high margins (Gross & Net) and pricing power with specialized products including RBDO. Strong enough MOAT - competitive advantage inorder to protect and sustain the high ROCE for a long time
PRESCO has quality earnings. High cash generating capacity, High FCF margin and FCF/Net income Ratio
PRESCO has High ROCE, Fair payout ratio with growth opportunity to allow compounding the retained earnings. Has a lot of unplanted areas. Capacity and history of expansion organically and inorganically.
Owner operators, good management with proven track record
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FACTORS SUPPORTING UPSIDE;
--Market is mostly B2B (Industrial customers)
--Product pricing takes into account international CPO prices and local inflation
--100% acquisition of Ghana Oil Palm Development Company (GOPDC) Limited (Export capabilities)
--Increased quantity and quality of FFBs from relatively young SNL plants (Ubima and Elele Estates)
--Completion of the New Mill at Ato Estate in expected in 2025
--Further Increased Processing and Refining Capacity
--Indonesia's increase in biodiesel blending: There's a robust demand for palm oil, particularly in biodiesel production, driven by policy mandates. Indonesia's increase in biodiesel blend rates from B35 to B40, and plans to reach B50, will require additional palm oil, supporting higher prices.
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SEE BELOW PRESCO's FUNDAMENTALS BASED ON FY'24 UNAUDITED REPORT
5Year Equity CAGR 44%
------Balance Sheet Health
Interest Coverage 14X; Net Debt/FCF 0.4
------Capital Intensity
CAPEX/Sales 34%; CAPEX/CFO 48%
------Capital Allocation
ROE 60%
ROCE 56%
CFROI 57%
ROIC 54%
CROIC 39%
CCR (CFO/Net Income) 136%
------Profitabilty
Gross Margin 68%
Net Profit Margin 53%
FCF Margin (FCF/Revenue) 37%
FCF Conversion (FCF/Net Income) 71%
------Deal Maker Toolkit
EV/EBITDA 5.7
ROIC - quality 54%
Earnings Yield EY 13%
------Growth
Revenue Growth YoY 239%
Earnings Growth YoY 455%
FCF Growth YoY 141%
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