CPO production likely bottomed in 1Q09. Operationally, it appears that the worst of the previous tree stress (due to the drought in 2006) has passed; CPO production increased 15.1% YoY and 30.8% QoQ, while CPO yield improved 1.5% YoY and 26.9% QoQ. We also understand that due to the better-than-expected production, GAR has about 100k ton of unsold CPO at end-Jun, but has since been sold. And while there may be a possible El Nino effect this year, management believes that the impact will probably be felt some 12 months later. It is also confident that it will escape the worst of the impact due to the dispersion of its oil palm plantations in Indonesia. Management is hopeful of seeing better production numbers in 2H09; also assured that it will not have excess unsold CPO this time around.
Bumping up our CPO assumptions. The recovery in the global economies has come slightly faster than expected and this has lent some support to crude oil prices and CPO prices. We have also raised our CPO assumptions for this year from US$600/ton to US$620/ton, and this in turn bumps up our FY09 revenue forecast by 6.8%. However, we raise our net profit estimate by a smaller 4.2% as GAR will still be working through the excess fertilizer that it had bought at a much higher price late last year; management expects to only enjoy lower fertilizer prices from next year onwards. We are raising our FY10 revenue and earnings estimates by 6.0% and 11.0%, respectively. Using a higher 12x blended FY09/FY10 EPS valuation (vs. 10x previously), our fair value will rise from S$0.35 to S$0.45. Given the limited upside, we maintain our HOLD rating.
Click here for more Commodity Stocks Technical Analysis
Sponsored Links
Comments
No response to “Golden Agri-Resources Ltd: Maintain HOLD”
Post Comments (Atom)
Post a Comment |
Post a Comment