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.

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.

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).

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.

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.

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 | http://www.dbsvickers.com/ 2015-11-13

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