22 Dec 2019 / by AP Securities (formerly Angping & Associates Securities)
FREE Special Report: DNL, AXLM to Benefit from Palm Oil Price Surge
NOTE: This premium Special Report is given to you for free. Want to access all stock reports at a DISCOUNTED rate?
As our Christmas gift to you, we’re slashing our 1-year subscription price to its lowest ever! Get PHP 800.00 discount when you subscribe to 1-Year Premium Access using the discount code CHRISTMAS2019.
Simply input CHRISTMAS2019 in the “Enter coupon code” field when you choose [Subscription Plan 1] * 1-Year Premium Access * to pay only PHP 3,999.00 instead of the full price of PHP 4,799.00.
Limited number of coupon codes available! Promo valid until all coupon codes have been used. So use the CHRISTMAS2019 coupon code today!
OUR PARTNER BROKER’S ANALYSIS AND RECOMMENDATION
Year-to-date, palm oil price has advanced by 36% this year to $685/ton and is expected to stay at elevated levels in 2020 due to Indonesia’s increased usage of biofuel and expected weaker production due to drier weather. The chief beneficiary of this is DNL and AXLM as higher raw material price is generally passed on to clients.
Benefit to DNL
Recall than in the 3rd Quarter, DNL’s revenues declined by 20% year-on-year (yoy) while AXLM’s dropped by 12% mainly due to lower commodity prices. Sustained elevated prices should support both managements’ outlook for a 2020 recovery.
The Philippines is one of the biggest consumer of plastics in the world, and at one point, Pres. Duterte has floated the idea of banning single-use plastics. Yesterday, DNL disclosed that it received certification for its biodegradable plastic products which could eventually replace single-use plastics. With packaging accounting for a major chunk of local manufacturer’s cost, this could eventually be a big business for DNL.
Consensus expects an 11% EPS growth for next year. As of yesterday’s closing price, DNL is trading at 19.8x (0.5x stdv below 6-yr mean). Given the improving outlook for the stock, we would look to accumulate near technical support at PHP 8.90/share, with potential upside to PHP 9.85/share (21x PE, in line with historical mean).
Benefit to AXLM
Another stock that we see benefitting from the palm oil surge is AXLM (Target Price: PHP 4.80/share, 11.1x P/E). Aside from increasing margins as coconut milk and water demand abroad surge, we see cost-leadership qualities (OPEX as % of sales maintained at 12% for the past seven quarters) in AXLM that will further support margin improvement.
Check out other useful and exclusive stock reports from our partner stockbrokers!
OTHER SPECIAL REPORTS
See all the most recent Special Reports below.
- Special Report: 8 PSE Stocks to Avoid During COVID Pandemic
- Special Report: 2 Safest Stocks to Buy during COVID Pandemic
- Special Report: Consumer Sector Update, with Target Prices for PGOLD, JFC, PIZZA, URC, MAXS (Mar 2020)
- Special Report: Oil Sector Outlook, with Target Prices for PCOR, SHLPH, PNX (March 2020)
- Special Report: Banking Sector Outlook with Target Prices for BDO, BPI, EW, MBT, SECB (March 2020)
This report is prepared by PinoyInvestor’s partner broker below. Sign up to this stock broker to avail of their complete trading brokerage services:
AP Securities (formerly Angping & Associates Securities)
AP Securities (formerly Angping & Associates Securities) is one of PinoyInvestor’s partners in delivering superior and reliable stock research reports that help Filipino investors make smart stock investing decisions! Learn more about them here.