MIDAS SHARE TIPS UPDATE: Palm oil producer offers sustainable return
MIDAS SHARE TIPS UPDATE: Demand for palm oil is rising faster than any other vegetable oil and MP Evans offers sustainable increase in return
Midas is a longtime fan of MP Evans, an Indonesian palm oil producer whom he first tipped in 2011.
Palm oil is used in everything from biscuits to shampoo and is the world’s most versatile vegetable oil. Demand for palm oil is rising faster than that of any other vegetable oil, despite concerns about deforestation and the loss of orangutan habitats when palm oil plantations are introduced.
MP Evans chairman Peter Hadsley-Chaplin continues to balance between producing as much sustainable palm oil as possible and keeping investors happy. The price of palm oil fluctuates – especially since the invasion of Ukraine – which also has a material effect on the results.
Yummy: We first tipped MP Evans £4.20 and the shares have since more than doubled
As the company celebrated its 150th anniversary this year, results looked rosy. Evans now produces 1.5 million tonnes a year and the company has no net debt. An increasing percentage of the product is certified sustainable, 64 percent more than last year: 55 percent. This share is expected to increase.
The cost of living crisis may lead us to buy fewer discretionary items that contain palm oil. Nevertheless, the price of oil is holding up well. The company is also increasing production, having recently bought land with the expectation of increasing the processed crop to 1.8 million tons by 2025.
As the war rages in Ukraine, the amount of sunflower oil produced is likely to remain low, while palm oil demand and prices remain high.
Midas verdict: For investors, there is much to like about Evans. It is cash generating, focused and offers a product that is in high demand. It also pays an excellent dividend, which it has maintained or increased every year for the past quarter century.
We first tipped it £4.20 and the shares have more than doubled since then. A year ago Evans shares were at £10.85 before falling back to their current level of £8.42. With a healthy 5 percent yield, the stock is still worth picking up.
Traded on: Main market ticker: MPE Contact: mpevans.co.uk or 01892 516 333