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Obtala – quarterly report notes challenges, though also progress: remains a buy

By HotStockRockets | Saturday 7 July 2018


Disclosure: Financial Investigative Media Limited, which is not owned by Tom Winnifrith but by a trust for his dependants, owns shares in companies mentioned in this article. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


Obtala (OBT) has updated to the first half of 2018, including emphasising “record volumes of sawn timber produced and containers shipped to customers”

First half revenue is up to $5.9 million, with current contracted sales $11 million – it noted “West Africa continues to perform strongly, benefitting from investments in new bulldozers and trucks following the capital raise in Q1 2018” and in Gabon “the veneer peeling machinery is world class and its revised installation gives greater flexibility to expand than originally specified, fully warranting the delay” - production is expected to commence this month.

There are some challenges - Mozambique regulation uncertainty, £0.25 million of the £4.6 million February 2018 equity raise not settled as expected (advice being taken) and that “the trend of de-risking by international banks is clearly cutting Africa off from traditional sources of international finance”.

However, the latter also sees it considered “given the growth backdrop of the continent however, very significant opportunities clearly exist for companies that prove themselves capable of delivering the necessary funding solutions”. Obtala intends to be amongst them – and its operations looks to support its view that it “is increasingly well positioned to attract strategic funding partners, for the trading division and co-operating partners for the agricultural business to drive our next phase of revenue growth”.

The shares have slipped to a depressed sub 8p, capitalising the company at not much more than £25 million. We consider that a positive outcome to the strategic funding issue has the potential to spark them from here – and retain confidence in Chairman Miles Pelham and co to deliver it. As such, the stance remains buy.

This article first appeared on HotStockRockets - to catch a red hot share tip from the HotStockRockets team out shortly for just £5 click HERE


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