Golden Agri-Resources - OCBC Investment 2016-11-15: Boost from tax benefits

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GOLDEN AGRI-RESOURCES LTD E5H.SI

Golden Agri-Resources - Boost from tax benefits

• 3Q16 EBITDA up 29%.
• Net profit boosted by tax credit.
• Keeping our view.

3Q16 net profit helped by tax credit 

• Golden Agri-Resources reported its 3Q16 results yesterday evening, with revenue up 16.6% YoY to US$1.84b and PATMI was at US$219.7m vs. a net loss of US$16.4m in 3Q15. 
• PATMI during the quarter brought 9M16 PATMI to US$353.3m, already exceeding consensus’ full year forecasts, due to a boost from the deferred tax income arising from the increase in tax depreciable value of its plantation assets. 
• The net tax impact from this revaluation of assets was US$111m during the quarter and US$242m for 9M16. For a clearer view on operational performance, EBITDA, which also excludes changes in fair value and FX, was up 29% to US$165.2m in 3Q16. 
• For 9M16, EBITDA was slightly down 2% to S$393m, due to a muted 2Q16 showing. 9M16 revenue reached US$5.1b, meeting expectations.

Better margins from Palm and Laurics unit 

• Notably, revenue from Palm and Laurics segment was up 16% to US$1.6b in 3Q16, and EBITDA improved 64% to US$135m with EBITDA margin at 3.7% vs. 1.9% in 3Q15. 
• The group was able to garner better margins during the quarter due to an environment of tight supply of refined products coupled with constant demand. 
• While margins in 4Q should potentially come off as supply recovers, we can still expect better margins of ~3% for the year.

Possible recovery for CPO production in FY17 

• We will continue to see such tax benefits in 4Q16 following government approvals, while keeping in mind that this is a one-off item and will not be repeated in FY17. 
• Noting a pickup for CPO production thus far for 4Q, the group has kept its expectations for a 15-20% decline in full year production. 
• Looking ahead, management believes there could be a recovery in FY17 and production may possibly get back to levels seen in 2015. 
• Following a change in analyst coverage, we adjust our estimates accordingly, and based on and based on 13.5x peg to FY17F EPS, our fair value is slightly higher at S$0.37 (previous S$0.34). Maintain HOLD.

Jodie Foo OCBC Investment | http://www.ocbcresearch.com/ 2016-11-15

OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 0.37 Up 0.340