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MIDAS SHARE TIPS UPDATE: Palm oil producer offers sustainable return


MIDAS SHARE TIPS UPDATE: Palm oil demand increasing faster than that of any other vegetable oil and MP Evans offers sustainable increase in return

Midas has been a long-term fan of MP Evans, an Indonesian palm oil producer that it first tipped in 2011.

Palm oil is used in everything from biscuits to shampoo and is the world’s most versatile vegetable oil. Demand for palm oil is increasing faster than that of any other vegetable oil, despite concerns over deforestation and the loss of orangutan habitats when palm oil plantations are introduced.

MP Evans chairman Peter Hadsley-Chaplin continues to walk the tightrope between producing as much sustainable palm oil as possible and keeping investors happy. The price of palm oil fluctuates – particularly since the invasion of Ukraine – which also has a material effect on results.

Tasty: We first tipped MP Evans at £4.20 and the shares have more than doubled since

As the company hit its 150th anniversary this year, results looked rosy. Evans is now producing 1.5 million tons a year, and the business has no net debt. An increasing percentage of its product is certified sustainable, 64 per cent up from last year’s 55 per cent. This proportion is forecast to rise.

The cost-of-living crisis may mean we buy fewer discretionary items containing palm oil. Nonetheless, the price of the oil is holding up well. The company is increasing production too, having recently bought land with an expectation that it will increase crop processed to 1.8 million tons by 2025.

While the Ukraine war rages, the amount of sunflower oil produced is likely to stay low, with palm oil demand and prices remaining high.

Midas verdict: For investors, there’s lots to like about Evans. It is cash generative, focused, and provides a product for which there is plenty of demand. It also pays an excellent dividend, which it has maintained or increased every year for the past quarter of a century.

We first tipped it at £4.20 and the shares have more than doubled since. A year ago, Evans shares were at £10.85, before falling back to their current level of £8.42. With a healthy yield of 5 per cent, the shares are still worth snapping up.

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