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Golden Agri-Resources Ltd - Rights issues potential leads to uncertainities
Wednesday, May 27, 2009
Golden Agri's 1Q09 core net profit of US$9m was below expectations, making up only 5% of our FY09 forecast and 3% of consensus. The poor results were due to lower-than-expected FFB production from its own and plasma estates. We are negative on its potential rights issue as it will be EPS-dilutive. Also, the group has no firm acquisitions that would require funding and gearing was low at only 0.09x as at 31 Mar 09. We are cutting our FY09-11 net profit forecasts by 6-15% to account for 1Q's weaker-than-expected FFB yields. We are reducing our target price to S$0.39 from S$0.46 to incorporate our earnings downgrade and a lower target P/E of 11x (from 12x). Following the stock's recent outperformance against the market, the poorer-than-expected 1Q results and our negative take on the potential rights issue, we downgrade it to Neutral from Trading Buy.
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Golden Agri Resources
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