Troubledoil giant Royal Dutch Shell (LSE: RDSB) has a place in the portfolios if no longer the hearts of many followers of the Fool. By contrast, AIM-listedEden Research (LSE: EDEN) is virgin territory. Yet it sprang into life yesterday, surging28% in the session, alerting many investors to its prospects for the first time. Is now the time to dispense with the ailing fossil fuelgiant and investing something fresh and natural instead?
Eden sprung into life after announcing thatits Kenyan partner, Lachlan Kenya Ltd, had received approval to begin sales of Edens fungicide 3AEY, to be sold under the trade name Hawk. Eden, based in Oxford, is workingto convertnatural plant defence mechanisms into eco-friendly agricultural, medical and industrial problems, notably usingterpenes to create low-risk agricultural chemicals.
It has received an initial order to provide enough 3AEY to treat an area of around 1,667 hectares and is now due a milestone payment from Lachlan, plusroyalties based on net sales. Chief executive Sean Smith says this represents Edens progression from being an IP development company to a commercial operation.This is the first commercial order for 3AEY Smith expects many such orders to follow, both fromKenya, and its European partners.
Some investors are already making money from Eden,whose share price has more than doubled since mid-April this year. Ithas been a long journey since the company was launched as Energiser in 1996, and has been through theslow process of carrying out carefully controlled global trials and making product submissions to the regulatory authorities. EU approval of 3AEY earlier this year gave it a boost, recently reported half-year revenues of 160,000 so just how far there is to go. Eden could grow into something special, but a long and thorny path lies ahead. As Kermit the Frogpointed out, its not easy being green.
Royal Dutch Shells garden is farlessrosy, with the share price plunging30% over the past 12 months. Todays oil price of around $43 for a barrel of Brent crude will play havoc with all its hopes unless it quickly rebounds. The longer oil stays low, the more imperilled Shellsdividend will be. Right now it yields a frankly crazy 7.29% but as we have seen lately, once the yield flies that high, a dividend cut wont be far away.
Shells management will be more reluctant to cut than most, its dividends havent fallen since the war. After posting a third-quarter loss of $6.1bn, that prospectmust be taken seriously, even if cash flow wasrelatively robust falling just13%. Most of the loss was down to one-off upstream charges including $4.62bn related to impairments, redundancy and restructuring, but the future looks tough until the oil price recovers.
There is no imminent hope of that with global inventories at record levels, although the Middle East couldshock us at any moment andSaudi Arabia will come under pressure to changeits supply strategy at Decembers Opec meeting. Trading at 7.99 times earnings, now could be a good time to buy Shell if you think the worst is over.
We live in strange times, when the outlook for oil giant Shellis justas uncertain as at eco minnow Eden Research. But Edens management is certainly feeling brighter right now.
There are brighter prospects out there right now, such asthis exciting opportunity, which Motley Fool analysts have singled out asone stock poised for global domination.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.