By NKIRUKA NNOROM

Analysts at Arms Research have projected that the share price of Presco Oil will experience appreciable increase within the year, even as they recommend a buy rating on the share.

The analysts said that it is estimated that Presco’s revenue over a seven year period will grow by 17 percent (Compound Annual Growth Rate) CAGR, on the back of strong domestic and industrial demand.

Presco Oil currently trades at N14.50, which brings the projected price appreciation to 55.31 percent over the period.

They said their projection was based on the company’s strategic position as the only palm oil producing company in Nigeria with operations across the entire value chain, adding that some positive metrics in the country which include the size of the population and the quantum of either palm or refined oil consumed by Nigerians favoured the company.

The analysts said, “In addition, Presco announced in half year 2012 of its acquisition of the moribund 16,000 hectares Rison Palms Plantation in Rivers State. This significantly brightens Presco’s long term prospects and provides them a platform to diversify into rubber which management guided to.

“As a producer of specialty oils, it is expected to benefit from Nigerian economic growth (NBS forecasts average seven percent over 2012-15) and increasing disposable incomes leading to greater consumption of packaged foods for which palm oil and its refined variant are key ingredients.

“In addition, increasing demand of palm oil products – olein, stearin and PFAD for usage in consumer care goods space should benefit from externalities arising from increased economic expansion.