GOLDEN AGRI-RESOURCES LTD
E5H.SI
Golden Agri-Resources - Higher refining profit, net tax credit lift 1Q16
- 1Q16 core net profit was broadly in line at 21% of our full-year forecast.
- Plantation earnings fell by 24% yoy due to lower CPO prices and production.
- Higher downstream and oilseeds profit help to offset weaker plantation contribution.
- It lowered its production guidance to 10-15% drop in output for FY16 due to El Nino.
- Maintain Reduce and a target price of S$0.35 as 2016 earnings may be unexciting due to lower output and higher depreciation changes.
Final results broadly in line with expectations
- Golden Agri’s 1Q16 core net profit was broadly in line with our and consensus, forming 21% of our full-year forecast and 18% of consensus.
- 1Q16 core net profit fell 7% yoy as better downstream margins, net tax credit and higher oilseeds earnings could not offset lower CPO prices and higher depreciation charges.
Forex gains lifted 1Q16 reported net profit
- The group reported net profit of US$94m for 1Q16, which was above our forecasts due to forex gain of US$52m arising from translation gain of its Rp-denominated assets and a US$2m biological assets gain arising from the fair valuation of one month of its FFB output. The fv biological asset gain is to reflect the adoption of the new accounting standards, mainly FRS16 and FRS41.
Higher downstream margins help to offset weaker plantation profit
- Plantation earnings fell 24% yoy in 1Q16 due to a 12% drop in FFB output from its estate and 16% yoy decline in ASP for CPO achieved of US$575 per tonne.
- Its palm and laurics business (downstream) division posted close to a three-fold jump in EBITDA, thanks partly to gains from inventory holdings in a rising CPO price environment.
- Its oilseeds reported a higher EBITDA of US$4m in 1Q16 due to higher crush margins.
Expect FFB output to fall by 10-15% in FY16 due to El Nino
- The group lowered its output guidance to a 10-15% drop in FFB for 2016 against its previous expectation of an 8-10% decline due to the sharper-than-expected drop in 1Q16 FFB yield. However, it kept its cost guidance of US$310 per tonne (+11% yoy) for 2016.
- The group also explained that the tax benefit was due to the revaluation of its Indonesian assets but it is not clear if this will be sustainable.
Outlook for the rest of FY16
- The group has revealed that the El Nino in 2015 is expected to lower its production in 2016. However, it expects the lower production impact to be mitigated by higher CPO prices, which should be driven by the lower palm supplies and higher biodiesel usage in Indonesia.
- The group has revealed that it projects CPO prices to trade in the range of US$700 to US$750 per tonne.
Maintain Reduce with an unchanged target price of S$0.35
- We maintain our Reduce call given the group’s unexciting near-term earnings prospects, as 2016 earnings may be impacted by lower output and higher depreciation charges due to the changes in the biological assets accounting policy.
- We maintain our target price of S$0.35, which is based on its historical average P/E of 15x.
Ivy NG Lee Fang CFA
CIMB Securities
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http://research.itradecimb.com/
2016-05-13
CIMB Securities
SGX Stock
Analyst Report
0.35
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0.35
