The Woodbois (LSE: WBI) share price enjoyed a boom in 2022. But it fell back, to a little under 4p as I write. The stock had attracted the attention of share-price rampers, who try to push prices up and then sell for a quick profit.
But maybe now, we can get a better sight of the long-term prospects for the business. Are Woodbois shares poised to climb again?
We’re looking at a 20% fall over the past 12 months. That’s in line with the way a lot of small-cap growth shares have gone. Many investors are seeking safety for their money as the economic screws tighten.
But if Woodbois really is a good growth prospect, maybe we can pick some up at a bargain price now. To work that out, I’d need to get a handle on the long-term valuation of the Woodbois business model.
Two parts
It seems like that’s a bit torn between the two parts of Woodbois’ operations. The core, the renewable hardwood business, is the one that’s bringing in the cash. But some investors seem to be buying Woodbois for its carbon credit business.
The latter is still very much at the planning stage. So if I bought Woodbois, it would have to be based on the wood business valuation. And that might actually be promising.
Attractive business
Wood is perhaps the most obviously renewable building material known. It literally grows on trees. And a forestry company can recapture the same amount of carbon from the air that’s in every plank it sells. Well, there’s some energy cost involved in the operations of the business. But the wood it produces is made directly from carbon dioxide, with a bit of water, plus sunshine for energy.
Woodbois is enjoying rising demand too. In its halfway update in August, the company reported a 38% revenue jump compared to the first half of 2021. And that’s with much of its forestry assets not yet in full production.
Geographic risk
I do worry a bit that the company is dependent on Gabon for its operations. I see no problems with the country itself. It enjoys one of the highest GDP levels per capita in the whole of Africa, and appears to be politically stable. But a single country of origin still makes me twitchy.
Still, I think I could live with that. So it all comes down to finances for me. And that’s where I go off the idea. I’m not saying there’s anything wrong. But the last couple of company accounts from Woodbois, including the latest interim, are hard to evaluate.
Unclear accounts
There are large sums in one-off special items, revaluations and things like that. And right now, I can’t get any real idea of underlying operational profitability. If the profit potential turns out well, I could easily see the Woodbois share price climbing. But if not, further price falls might be on the cards.
Will Woodbois reach sustainable profits without needing to raise any fresh capital? I have no way to tell. It’ll be six months or so before we get the next full-year results. I’ll wait until I see them.
