Shares of Ivory Coast’s rubber and palm oil producers may more than double because of an expected rise in commodity prices and an economic recovery in the West African nation, Imara Africa Securities said in new coverage.
The brokerage rated Societe Africaine de Plantations d’Heveas SA, known as SAPH, Societe des Caouchoucs de Grand-Bereby SA, known as SOGB, and Palmci SA as “buy” and set estimates for the share prices of the three Abidjan-based companies of more than double their current levels, according to an e-mailed report today by Harare, Zimbabwe-based analyst, Batanai Matsika. The companies are listed on the regional BRVM stock exchange in Ivory Coast.
“We strongly believe that these three BRVM-listed stocks will be winners in turns of returns over the next two to three years,” Matsika wrote. This is “largely driven by a bullish outlook on rubber and palm oil prices as well as political stabilization” in Ivory Coast.
Business in Ivory Coast was disrupted late last year and earlier this year after President Laurent Gbagbo refused to step down after losing an election and was later ousted from power. The government has forecast a 6.3 percent economic contraction this year.
SAPH’s price estimate was set at $197.70, or 87,662 CFA francs, by Imara, a 140 percent gain from yesterday’s closing price of 36,500 CFA francs. SOGB’s share price may rise to $177.60, or 78,756 CFA francs, a 129 percent rise from yesterday’s 34,400 CFA franc close while Palmci’s price may rise 178 percent to $56.40, or 25,000 CFA francs, Imara said. The BRVM index has fallen 7 percent this year.
SAPH produces rubber while SOGB produces both commodities and Palmci produces palm oil.
Rubber prices are likely to rise on growing use in China, India and Malaysia. Demand is expected to rise 9.1 percent to 3.6 million metric tons in China next year, while Indian demand may grow as much as 5 percent to 991,000 metric tons and Malaysian demand could rise 7 percent to 490,000 metric tons, Imara said.
China, India, Malaysia, Thailand and Singapore, who account for 92 percent of global production, will likely produce 9.77 million metric tons this year, 4.8 percent more than in 2010.
Rubber for December delivery traded at 373.20 yen a kilogram ($4,702 a ton) on the Tokyo Commodity Exchange today and the price of the raw material has fallen 11 percent this year.
While Africa accounts for only about 4 percent of world rubber production, with half of that coming from the Ivory Coast, production costs are lower than in Asia, Imara said.
Ivory Coast has about 126,000 hectares (311,000 acres) of land producing rubber and the government plans to plant a further 600,000 hectares by 2018 in the form of new land and new plants on old plantations, Imara said, without saying where it got the information. Production this year may rise 5 percent to 238,000 tons.
Palm oil production rose about 5.5 percent in Ivory Coast last year to 415,900 tons, Imara said. Palm oil for September delivery rose 1.6 percent on the Malaysia Derivatives Exchange today to $3,082 ringgit a ton and has gained 19 percent this year.