Company Description

Benso Oil Palm Plantation is a Ghanaian oil palm plantation company.

The company is involved in the growing and processing of palm fruit to the production of palm oil and palm kernel oil. Benso brands include RBD palm oil and RBD palm olein. The company refines fats and oils and owns patent technology to convert waste food into nutritious food.

Benso is a subsidiary of Wilmer Africa. The company has a 52-Week share performance range of GH¢5.50 to GH¢6.91 and a market cap of 240 million Ghana Cedis which results in a total enterprise value of 210 million Ghana Cedis.
Benso has a fiscal year EBIT Margin and Gross Margin of 48% and 54% respectively in 2021 and a current dividend yield of 15%.

Performance History

GROWTH ANALYSIS





Industry Comparison

Benso outperforms other companies in the fast consumer goods.



Valuation

VALUATION HIGHLIGHTS

BENSO is highly liquid; the company has not subscribed to any loan for the past 10 years. The catch here is that all the value the company creates comes to equity holders.

BENSO is a defensive stock.



In the space of increased Weighted Average Cost of Capital as a result of the economic conditions, BENSO still delivers great value which gives and will continue to give investors a good deal for their investment.



OTHER TAKEAWAYS

•EXCELLENT DIVIDENDS

2016 2017 2018 2019 2020 2021
Dividend Payout Ratio 20% 20% 20% 20% 30% 40%

Investment in BENSO now does not only offer capital appreciation, but it also comes with creamy dividends. BENSO has never missed Dividend Payments for the past 10 years despite the nationwide economic shocks in some years. The company also maintains a consistent dividend payout ratio. And thus, with the rise in Net Income and its recent payout ratio (2021) of 40%, investors will receive impressive dividends.


• P/E AND EV/REVENUE MULTIPLE.

2018 2019 2020 2021
Adjusted P/E Multiple 57.92x 30.16x 10.28x 2.75x
EV/Revenues 2.65x 2.19x 1.69x 0.98x

As a result of a boost in earnings, we have seen a significant drop in the P/E multiple of BENSO. Likewise, EV/Revenue has decreased.

• DILUTION OF SHARES

Of the 37 companies listed on the Ghana Stock Exchange, BENSO is 9th company with smaller shares outstanding. BENSO has 34.8 million shares outstanding. It is therefore less diluted but creates impressive value which goes to its few owners (shareholders).

Industry & Economic Analysis

INDUSTRY ANALYSIS

Using Michael porters five forces

 Power of suppliers - Low

Input percentage

Benso grows over 70 percent of the palm fruit it processes hence the low need for inputs from suppliers.

Substitutes

There are many small-scale palm farmers in Benso who can get their supplies from.
Forward integration.

Since the company operates on a high scale company does not run under the risk of forward integration from its suppliers.

All this gives BENSO a higher bargaining power over its suppliers hence, this makes the company becomes the one negotiating the price.

 Power of buyers - High

Oil is essentially an undifferentiated product, for instance, the price of palm oil rises, and buyers can easily switch to other oil products like vegetable oil or fat oil.

And since it’s just moving from one brand to the next the cost of switching would be low as the only difference would be to taste which is even very mild.

 Competitive rivalry - High

There are numerous competitors in the oil industry from small-scale competitors to international competitors like Okumu palm oil.

And since it is a fast growth industry more people are interested to venture into it.

 Threat of substitutes - High

There are a lot of products customers can pick from which makes the competition high.

 Threat of new entry - Low
The capital required to be able to operate at the scale Benso is huge. And since the company can provide more due to their economies of scale.

Although the industry is *highly competitive*, we believe BENSO has *greater market share* because of its size, and as such *higher profitability and better share performance*.

ECONOMIC ANALYSIS

GDP Growth: The 3-Year Pre-COVID GDP growth was 6.95% averagely. The Ghanaian economy had a steady recovery in 2021 but in 2022, the GDP Growth rate has been revised from 5.8%to 3.7% due to economic turbulence.

Inflation: Inflation soared to 50.3% in November 2022 from 13.9% in January 2022 due to the higher depreciation rate of the cedi and the fuel price spike from the Russia-Ukraine war.

Government Debt: Public debt stock to GDP in the third quarter of 2022 was 75.9% with the expectation of an increment to 84.6% at the end of the year. However, the Public debt is expected to decline should the IMF deal push through.

Implication

Positive outlook as the Cedi strengthens against the dollar partly because of the staff-level agreement with IMF.
And with debt restructuring resulting in imminent defaults in bonds, many investors who opt to diversify their portfolio will turn to equity investments which we believe Benso is the best option.

Recommendation

We believe BENSO is a GOOD BUY at GH₵ 7.65 for SHORT-TERM and LONG-TERM investment with excellent Dividend prospects.

Disclaimer: This document does not constitute an offer to buy or sell any securities, nor is it meant to encourage an offer to do so. It is for educational purposes only. Before purchasing any security, investors are urged to consult with their respective investment houses for independent advice.

This document's facts and opinions were gathered from or arrived at after doing our best to rely on credible sources. Although great care has been taken in the preparation of this paper, NIMED CAPITAL and the Young Investor Network, as well as any team member, make no guarantees as to the accuracy of the information included within.

This report's conclusions and projections are subject to change after publication at any moment without prior notice.

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