High palm oil prices allow MP Evans to increase payments

  • Palm oil production increased by 15% to 312,900 tonnes last year
  • Average mill gate prices increased 37% to $810 per ton

palm oil producer Congressman Evans (MPE) will pay a special dividend of 5 pence per share in addition to its scheduled payment of 30 pence per share for 2021 based on its previously announced land disposal in Malaysia and improved agricultural production in Indonesia.

The company said the fresh oil palm crop it handled last year rose 13% to nearly 1.37 million bunches, 809,000 of which were its own – the rest was either produced by smallholders on his estate, or by independent smallholders.

The production of crude palm oil in its factories increased by 15% to reach 312,900 tons. Average factory gate prices rose 37% to $810 (£400) a tonne. Prices have continued to rise and are currently over $1,000 per ton, the company said.

MP Evans now produces all of its palm oil in Indonesia. The last 70 hectares of land he owned in Malaysia on the Bertam estate was sold to joint venture partner Bertam Properties (in which he has a 40% stake) for around $24 million in October.

The 30p annual dividend already announced by the company represents a 36% increase on the previous year.

With the company having reduced its debt last year from $78.1 million to less than $10 million, it could soon transition to net cash, brokerage Peel Hunt noted.

This gives it the firepower not only to invest in new plantations and new milling capacities, but also to further increase its dividend. It is also considering acquisitions, the broker added.

He expects the company to make a profit of 82.9 cents US per share this year. Shares of MP Evans are currently trading at 14 times that level, having gained in value around 24% in the past six months. However, this remains below both its five-year average and its peers, according to FactSet, and given its growth prospects, we maintain our Buy recommendation.