Market Minnows: DekelOil hopes it can make it big in the Ivory Coast

Britain's relationship with palm oil in Africa goes back to 1907 when Bolton-born William Lever sought it for his Lancashire soap mills.

Together with his brother James, he set off for the Congo and established Lever Brothers, one of the first companies to manufacture soap from vegetable oils. It is now part of Anglo-Dutch giant Unilever.

Also used for lubricating machinery and making mayonnaise, palm oil remains as popular as ever. Producers of the stuff are mainly based in Malaysia and Africa but, given the UK’s historic ties with the industry, many are listed on the London Stock Exchange. One such company is DekelOil. It’s come a long way since its IPO in 2013.

It runs a profitable “seed to palm oil” project in the Ivory Coast, and last year pumped out 39,000 tonnes. The shares have been climbing steadily over the past two weeks after it posted record levels of palm oil production in its fourth quarter and was rewarded with a Buy rating from analysts at Cantor Fitzgerald.

Adam Forsyth at Cantor says: “A stronger fourth quarter shows DekelOil back on track. The ability to secure premium prices is also apparent. It is set to complete the planned capacity increase at its mill ahead of the peak harvesting season starting in February.”

But running a business in Africa is not all easy, and the firm has experienced the odd glitch. Halfway through last year, its share price fell from 14p to 9p after it announced mechanical issues during May and June at its mill.

The failures meant first-half production came in lower than expected.

Executive director Lincoln Moore said: “We had some mechanical problems but I think the stock was oversold at the time. The high season starts now, between January to June. This is when we get 70% of our production done.”

On the plus side, the firm has managed to keep the local community onside. DekelOil has oil palm supply agreements with many local farmers, covering 27,000 hectares, so it has avoided investing considerable funds and time in securing and planting company-owned estates then waiting years for the plants to mature.

One more bonus for investors could be the M&A play. Malaysian palm oil producing giants such as Sime Darby — who have a stake in Battersea Power Station — have a history of snapping up smaller players.

In 2014, Felda Global Ventures acquired AIM-listed Asian Plantations for £120 million.

This was followed in 2015 by Sime Darby who completed a $1.7 billion acquisition of London-listed New Britain Palm Oil.

Will DekelOil be next?