http://business.timesonline.co.uk/article/0,,8211-1694844,00.html
"Biofuels Corporation
BIOFUELS CORP, which wants to convert palm oil into environmentally friendly diesel, was one of the best performers on the AIM yesterday. The shares soared 27 per cent to 184p after management posted an upbeat outlook statement. The strong run belies a mixed history. Four months ago the shares traded at 311p, after an oversubscribed £32.7 million fundraising at 230p. But a shock trading update a month later, containing poor news from Germany and delays to the construction of plant at Teesside, created dismay. Biofuels’s shares fell as low as 70½p in May.
Yesterday’s update restored some confidence. Sean Sutcliffe, chief executive, said that the Teesside plant was on target. More importantly, 64 per cent of its 21,000 tonne-a-month start-up output has been pre-sold to blue-chip refinery customers in the UK, and the firm is confident that the rest will go during the next seven weeks.
Biofuels is still paying the price of an unfavourable hedging arrangement that forces the company to pay above-market prices for its palm oil. Risks also remain that the Teesside plant will encounter other start-up difficulties, thereby delaying the much-needed first revenue flow.
But fundamentals for biodiesel are strong. The European Union Biofuels Directive demands that biofuels should be at least 5.75 per cent of fuel used in member states by 2010 and there is a dearth of biodiesel suppliers. Investors should be under no illusions about the level of risk that circles this stock. At 184p, however, the risk-reward ratio is appealing. Buy."
