Golden Agri-Resources - OCBC Investment 2019-02-27: Photosynthesising


Golden Agri-Resources - Photosynthesising

  • Golden Agri-Resources' 4Q18 boosted by Fair Value gains.
  • 10.5k ha replanted in FY18.
  • Indonesia supporting biodiesel demand.

4Q18 results boosted by Fair Value changes of financial assets

  • GOLDEN AGRI-RESOURCES LTD (SGX:E5H) registered a 14.1% y-o-y drop in revenue to US$1.65b and a net profit of US$79.3m in 4Q18, bringing full year net loss to US$1.8m after net losses in 2Q18 and 3Q18. This compares to our net profit forecast of US$22m for FY18 and the street’s US$39.5m forecast.
  • Golden Agri-Resources' reported underlying net profit fell 28.8% to US$180.7m in FY18, though this was boosted by a US$115m gain from changes in fair value of financial assets in line with higher fair market valuation.
  • The group adopted IFRS 9 at the beginning of the year where all the financial assets, particularly unquoted securities are required to be stated at fair value instead of cost. The comparative figures in FY17 have not been restated in accordance with the transition provision of IFRS 9.
  • Golden Agri-Resources also saw a US$33.0m loss from JVs in 4Q18, bringing FY18 loss from JVs to US$40.4m. This was mainly due to a loss in a joint venture that started commercial operations in 4Q17 and is currently in the market development phase.

Net cash from operations remained healthy

  • Net cash from operations in FY18 was US$283m, compared to US$533m in FY17. Over the past 5 years, this has averaged about US$346m per year. Net cash used in investing activities amounted to US$340m in FY18, mainly due to capex of US$266m for the year.
  • In FY19, Golden Agri-Resources expects capex to hover around US$250m.
  • Net cash from financing activities was US$88m in FY18.

Continues replanting programme

  • Looking ahead, Golden Agri-Resources expects the demand growth for CPO to remain stable supported by global food and energy demand, particularly the increase in biodiesel consumption in Indonesia. The group completed 10,500 ha of replanting in FY18, and targets for 15,000 ha in FY19.
  • Golden Agri-Resources has proposed a final dividend of 0.58 S cents per share after omitting an interim dividend this year, sticking to its 30% payout of underlying profit. This compares to an interim of 0.693 S cents and final of 0.116 S cents in FY17.
  • We tweak our estimates and our Fair Value estimate rises from S$0.24 to S$0.27.

Low Pei Han CFA OCBC Investment Research | https://www.iocbc.com/ 2019-02-27
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