Golden Agri Resources - DBS Research 2015-11-13: No surprises

Golden Agri Resources - DBS Research 2015-11-13: No surprises GOLDEN AGRI-RESOURCES LTD E5H.SI 

Golden Agri Resources - No surprises 

  • 3Q15 earnings of US$16m was in line with our expectations, on annualised basis, but below consensus 
  • Palm & Lauric EBITDA was higher than expected; although it was offset by weaker-than-expected contributions from Plantations and Oilseeds & Others 
  • A new 300k MT p.a. biodiesel capacity is planned for commissioning in 1Q16 and start contribution in 2Q16 
  • FY15F/16F earnings tweaked by +3%/-5%; TP adjusted to S$0.291. 

3Q15 earnings in line with expectations. 

  • Golden Agri Resources (GGR) booked 3Q15 earnings of US$16m (-23% y-o-y; -1% q-o-q) – in line with our expectations but below consensus on annualised basis. This brought 9M15 earnings to US$72m – representing only 77% of our initial FY15 expectations vs. 72% historical. 
  • Performance in 3Q15 was dragged by 23% y-o-y drop in CPO ASP (-1% q-o-q) and weaker-than-expected contribution from Oilseeds & Others. 
  • For 9M15, Palm & Lauric segment EBITDA contributed better-than-expected EBITDA. This was offset by weaker-than-expected Plantations contribution; as the group booked a 1% y-o-y drop in 9M15 FFB output (vs. our initial forecast flat growth for the full year). 
  • While 9M15 EBITDA contribution from Oilseeds & Others rebounded to US$8m; we had overestimated the recovery. 

Plantation contribution lower than expected. 

  • The group is maintaining its FFB output growth guidance this year close to zero, due to dry weather. 
  • For the quarter, GGR booked a 10% sequential recovery in FFB output (including smallholders) – partly offset by 1% q-o-q lower CPO ASP. This yielded 3Q15 Plantations EBITDA of US$97m (-12% y-o-y). 

Palm & lauric boosted by lower feedstock cost. 

  • GGR’s Palm & Lauric segment booked 3Q15 EBITDA of US$27m (-16% q-o-q; +297% y-o-y). 
  • Refining margin had narrowed from 2Q15, as we understand some of the CPO feedstock had been fixed; while product prices continue to weaken. We expect this trend to reverse in 4Q15, in line with recovery in prices. 
  • The group had recently completed its refining capacity expansion of 1.2m MT p.a., which brought its total capacity to 4.7m MT p.a. 

Oilseeds & Others remain weak. 

  • GGR reported 3Q15 combined EBITDA contribution of US$3.4m (flat q-o-q). 
  • Slight deterioration in the group’s Noodle EBITDA to US$0.4m was partly offset by slightly better Oilseed EBITDA contribution of US$3.0m. 

Earnings, valuation tweaked slightly. 

  • We revised FY15F/16F earnings by +3%/-5%, as we imputed better-than-expected Palm & Lauric contribution, offset by cuts in Oilseeds & Others and Plantations. This results in a revised DCF estimate of S$0.29 (WACC 10.7%; TG 3%) from S$0.27/share previously. 
  • We have not yet imputed any biodiesel contribution, subject to the plant’s completion.

Ben Santoso DBS Vickers | 2015-11-13
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