Saturday, November 16, 2013

Golden Agri-Resources: Another disappointing quarter (OCBC)

Golden Agri-Resources:
Fair value S$0.465
add: 12m dividend forecast S$0.010
versus: Current price S$0.565
Another disappointing quarter

Golden Agri-Resources (GAR) continued to feel the blunt of weaker CPO prices and suffered another disappointing quarter, resulting in 9M13 earnings meeting just 51% of our original forecast. While it expects to see the sequential growth in CPO production in 4Q13, GAR now guides for a 5% contraction in CPO production this year (versus earlier 5-10% growth guidance); although it is likely to revert to this usual growth forecast next year. While our FY13 earnings estimate is probably one of the lowest on the street, we need to slash it further by 31% (FY14 by 12%), while keeping our revenue forecasts largely unchanged. No doubt that the worst may be over, we note that the recent price rally looks overdone. As such, we maintain our SELL rating with an unchanged fair value of S$0.465 (based on 12.5x FY14F EPS versus 11x blended FY13/FY14F EPS).


3Q13 showing below our forecast
Golden Agri-Resources (GAR) continued to feel the blunt of weaker CPO prices (ASP of US$806/ton versus US$811/ton in 2Q13), with 3Q13 revenue falling 6% YoY (-7% QoQ) to US$1570.8m. Coupled with higher cost of production, reported net profit tumbled 65% YoY (down 33% QoQ) to US$30.2m. 9M13 revenue grew 3% to US$4683.1m, meeting 75% of our original FY13 forecast, but due to higher-than-expected salary costs, net profit slipped 47% to US$188.3m, or just 51% of our full-year estimate. GAR declared an interim dividend of 0.585 S cent/share versus 0.6 S cents a year ago.

Guides for lower CPO production this year
While CPO production saw a 17% QoQ growth in 3Q13, and should continue to see seasonal improvement in 4Q13, management now expects a contraction of 5% versus its earlier guidance of 5-10% growth for 2013. Capex remains at US$550m for this year, with the bulk of it going towards plantation expansion, downstream and logistics capacity increases. Nevertheless, GAR believes that CPO production should revert to the usual 5-10% growth next year. It is also generally positive about the CPO market next year, where prices should recover further. However, it warns that rising wage pressures could push cash cost of production higher again next year, although the lower fertilizer cost could mitigate the extent of the increase.

Paring earnings estimate further
While our FY13 earnings estimate is probably one of the lowest on the street, we need to slash it further by 31% (FY14 by 12%), while keeping our revenue forecasts largely unchanged. No doubt that the worst may be over, we note that the recent price rally looks overdone. As such, we maintain our SELL rating with an unchanged fair value of S$0.465 (based on 12.5x FY14F EPS versus 11x blended FY13/FY14F EPS).



Source/Extract/Excerpts/来源/转贴/摘录: OCBC-Research,
Publish date: 13/11/13

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