Obtala – Acquisition of Woodbois
Acquisition of WoodBois adds a potential 13.4p upside to our current base case valuation of 30.52p
Obtala Limited is an Africa focussed forestry and agriculture company with a goal of becoming one of East Africa’s largest sustainable food and timber producers.
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Acquisition of WoodBois International ApS
Obtala has announced that 75% owned forestry subsidiary Argento Limited is to acquire WoodBois International for a total consideration of $14.8 million (c.£11.4 million) in a mixture of cash and shares, subject to satisfactory due diligence. Completion is targeted for 30th June 2017.
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Sawn timber trader expanding into higher value verticals
WoodBois is engaged in the global trading of sawn timber which it sources from producers throughout Africa. The business also produces sawn timber planks from its concessions in the country of Gabon and is moving up the value chain by completing constructing of a veneer making facility.
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Obtala applies its financial strength towards WoodBois expansion
Obtala now has plans to rapidly expand the timber trading business, which to date has been constrained by a lack of access to capital. The immediate plan is to expand the sawmill from its current annual capacity of 24,000m³ sawn timber and upgrade the veneer facility to a planned annual capacity of 18,000m³ of veneer in 2017. Expansion of both business lines is estimated to cost c.$0.5 million in capex.
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Target price of 30.52p retained but WoodBois potential value is clear
With the WoodBois deal still subject to due diligence we retain our 30.52p DCF based fair value target price. However, having analysed the base financial case for the deal using a similar DCF approach to our core valuation, we believe that WoodBois could add further value to Obtala shareholders of around 13.4p per share. Conviction Buy stance reiterated.
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DISCLAIMER
Obtala is a research client of Align Research. Align Research holds an interest in the shares of Obtala. For full disclaimer information please refer to the last page of the full document. This investment may not be suitable for your personal circumstances. If you are in any doubt as to its suitability you should seek professional advice. This note does not constitute advice and your capital is at risk. This is a marketing communication and cannot be considered independent research.
| Year to Dec 31st | 2015A | 2016E | 2017E | 2018E |
|---|---|---|---|---|
| Revenues (£m) | 3.69 | 0.8 | 6.05 | 23.6 |
| PBT (£m) | (10.4) | (6.0) | 1.05 | 11.9 |
| EPS (p) | (5.44) | (2.3) | 0.25 | 3.1 |