GOLDEN AGRI-RESOURCES LTD (SGX:E5H)
Golden Agri-Resources - Yet Another Loss-Making Quarter; Still SELL
- Golden Agri Resources remained in the red in 2Q20, despite an 18% y-o-y increase in CPO prices, below our and consensus expectations. We expect earnings to improve from hereon on better FFB output and CPO prices. However, the stock is trading at 43x FY21F P/E, significantly above its peers and its historical mean of 22x.
- Maintain SELL, Target Price of SGD0.13, 19% downside.
2Q20 remained in the red
- Golden Agri Resources (SGX:E5H)'s 2Q20 remained in the red with a core net loss of USD28.4m, albeit an improvement from 1Q20’s core net loss of USD53m. This brought 1H20 core net loss to USD81.4m. This was below our FY20F net loss of USD36m and consensus’ estimates of a profit of USD25m.
- The disappointment came from lower FFB output (-6.6% in 1H20 versus our -2% assumption) and lower downstream profits (-42% y-o-y). CPO prices rose 23% y-o-y in 1H20.
For FY20, Golden Agri Resources is reducing its FFB output forecast to -5% (from flat).
- Golden Agri Resources has started to see a recovery from August, with expectations of a peak in 4Q20. The weather has not been significantly adverse, although there has been some heavy rainfall recently. We reduce our FY20 FFB growth forecast to -7% (from -2%), but maintain 3% for FY21F-22F.
- Golden Agri Resources replanted 10k ha in 1H20, on track to hit its target of 15-20k ha.
- The company booked a unit cost of USD308.00/tonne in 1H20 (-1% y-o-y), which excludes the USD54.00/tonne export tax levy it paid in 1H20.
Downstream division improved q-o-q, but down 42% y-o-y in 1H20.
- Although 2Q20’s volumes and margins have improved vs 1Q, overall sales volume was still down 7% y-o-y in 1H20. Margins almost halved in 2H20 due to logistics disruptions caused by COVID-19 and higher feedstock prices. Golden Agri Resources guided for margins to improve in 2H20, as demand has mostly returned to normal from its main consumers.
- On the biodiesel front, Golden Agri Resources is running at 100% utilisation, but margins have reduced to low single digits due to the change in the pricing formula. Golden Agri Resources is expanding its biodiesel capacity by 450k tonnes (+75%), and this will come onstream in 2H2021.
- Golden Agri Resources expects Indonesia’s B30 mandate to fall short slightly by about 8% this year to 8.8m kilolitres, based on the takeup so far in 5M20 of 3.6m.
Maintain SELL.
- We bring down our earnings to reflect a larger loss of USD100m in FY20 (from –USD36m), while we cut our FY21-22 forecasts by 24-28%. This is after raising selling expenses for the higher export tax and reducing FFB forecasts and downstream margins.
- See Golden Agri Resources Share Price; Golden Agri Resources Target Price; Golden Agri Resources Analyst Reports; Golden Agri Resources Dividend History; Golden Agri Resources Announcements; Golden Agri Resources Latest News.
- We make no changes to our Golden Agri Resources's SOP-based Target Price of SGD0.13. We maintain our 0.5x P/BV to value the downstream wing and our USD2,100 EV/ha valuation for its upstream unit. This is lower than its peers, which are trading at USD5,000-15,000/ha. We deem this as justified, given Golden Agri Resources’s older tree age profile.
Singapore Research
RHB Securities Research
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https://www.rhbinvest.com.sg/
2020-08-17
SGX Stock
Analyst Report
0.130
SAME
0.130
