Brokers' Views: Gall & Eke Corporate Partners

Gall & Eke has run the rule over recent AIM newcomer Equatorial Palm Oil (EPO) – which is aiming to become a low-cost producer of crude palm oil, a common ingredient in processed foods – and suggests it offers investors ‘the potential for rapid growth’.

‘With operations located near the coast in Liberia,’ the broker writes, ‘EPO has signed two 50-year government-ratified investment agreements for the regeneration of existing plantations (10,200 hectares) and the generation of a further 78,548 hectares of agricultural land.’

Plantation partnership

The company, which debuted on AIM in February having raised £6.5 million at 17.5p, has also inked ‘a memorandum of intent to establish a joint venture to develop palm oil plantations over at least a further 80,000 hectares and plans to rehabilitate existing plantations as well as develop both new and out-grower plantations’.

Tumbling in late 2008 as the global financial crisis took hold, palm oil prices, says Gall, ‘have recovered well on the back of strong global demand and the restricted availability of suitable locations for new sustainable developments’. Furthermore, ‘EPO conducts its agro-forestry in a sustainable manner, with the aim of ensuring that the benefits of producing palm oil do not come at the cost of destruction of the environment.’

Arguing that the ‘core valuation’ of EPO is approximately £20 million, the broker sees more than 60 per cent of upside potential, with EPO having settled to a £12.4 million market cap. As such, the current 15.25p share price offers ‘a good entry point’ and Gall also notes that the shares ‘may be popular with IHT portfolios’.