Here is something that is baffling and boring at the same time.
Price Monitoring Extension
The auction call period has been extended in this security by 5 minutes.
Auction call extensions give London Stock Exchange electronic order book users a further opportunity to review the prices and sizes of orders entered in an individual security’s auction call before the execution occurs. A price monitoring extension is activated when the matching process would have otherwise resulted in an execution price that is a pre-determined percentage above or below the price of the most recent automated execution today.
The applicable percentage is set by reference to a security’s Millennium Exchange sector. This is set out in the Sector Breakdown tab of the Parameters document at www.londonstockexchange.com/tradingservices
I think there is normally a two minute auction period to determine a fair value for shares and now, I think, this has been extended to seven minutes for shares in palm oil producer, MP Evans. Why? I don’t know.
What I do know is how MP Evans did in the first half of 2018. Let’s get the bad news out of the way first. They sold their palm oil for an average of $663 per tonne, 10% lower that the first half of 2017. That’s not the bad news. The bad news is that the palm oil price today is $555 per tonne. If you are a chartist you might think it has found a bottom at $550 but in October 2017 it was $750. This price weakness stems from a rebound in production of palm oil in South East Asia combined with good global supply of other vegetable oils, notably soya. It cannot continue indefinitely as the source of all vegetable oils except palm and olive are annual crops and farmers will switch to something more profitable if prices are too low. However, it may take a while for economic theory to turn the real world market around.
Now that’s out of the way I can share the good news. Crude palm oil production was 23% higher than in the first half of 2017. Over 1,000 hectares of new planting was achieved and yields continue to improve as young plantings mature. There’s an operating profit of $10.7 million and the interim dividend is unchanged at 5 pence per share, going the shares a yield of about 3.5%.
Looking ahead, chairman Peter Hadley-Chaplin, anticipates strongly rising production which will be enhanced if he can find additional acreage. MP Evans is in good shape to sit out a period of low palm oil prices but of course if they go back up that will be the icing on the cake. Competitor Malaysian palm oil producer KLK continues to take an interest in MPE – they hold more than 15% of the shares and may make a bid. Their last bid, at the end of 2016, was £7.50. Then Peter H-C valued the shares at £11. They must be worth a bit more now although they are trading today at only £7.50. Incidentally 81% of MPE’s production is certified sustainable palm oil, a figure that will rise so that before the end of 2023 all of its production (bar one small estate) will be certified sustainable.
I speak from a position of ignorance, but I’m aware that palm oil is not universally welcomed – at least not by those who won’t be making a quick buck from it and may have far more pressing existential reasons for opposing it. I give you, apropos nothing really, the following from the somewhat prosaically named ‘Say No To Palm Oil’ organisation.
“The industry is linked to major issues such as deforestation, habitat degradation, climate change, animal cruelty and indigenous rights abuses in the countries where it is produced, as the land and forests must be cleared for the development of the oil palm plantations. According to the World Wildlife Fund, an area the equivalent size of 300 football fields of rainforest is cleared each hour to make way for palm oil production. This large-scale deforestation is pushing many species to extinction, and findings show that if nothing changes species like the orangutan could become extinct in the wild within the next 5-10 years, and Sumatran tigers less than 3 years.”
Each to his own, I suppose, but, as an investment opportunity, palm oil would seem to fall some way short of being ‘ethical’.