R.E.A. Holdings

Background

R.E.A. Holdings plc is a listed UK public company of which the shares are admitted to trading on the main market of the London Stock Exchange. the REA group is principally engaged in the cultivation of oil palms in the province of East Kalimantan in Indonesia and in the production of crude palm oil and by-products. In addition, the REA group has acquired rights in respect of three coal concessions in East Kalimantan and is developing an open cast coal mining operation and coal trading activity based on these concessions.

Investment Notes

2015 has been a tough year with harsh climatic conditions and depressed commodity prices. We are forecasting a small and reduced profit for the year as a consequence and cash flow has been impacted negatively.

The company has responded by introducing a net new $19.3m of funding being a mixture of equity and debt capital. But behind the fog of difficult business conditions, operating efficiencies can be seen to be rising and the electricity supply operations have begun to generate first year revenues. This is a significant development and we do not think that it has been adequately reflected in the valuation.

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