Golden Agri-Resources - OCBC Investment 2020-11-19: Slower Than Expected Recovery

GOLDEN AGRI-RESOURCES LTD (SGX:E5H) | SGinvestors.io GOLDEN AGRI-RESOURCES LTD (SGX:E5H)

Golden Agri-Resources - Slower Than Expected Recovery

  • Golden Agri Resources' PATMI remained in red in 3Q20.
  • Higher CPO prices were offset by lower sales volume.
  • FFB production expected to decline 5-10% in FY20.



Golden Agri Resources' 3Q business update

  • Golden Agri Resources (SGX:E5H)’s 3Q20 results came in below ours and the street’s forecasts due to weaker-than-expected FFB production. 3Q20 revenue rose 3% y-o-y to US$1.6b on higher average selling prices but fell 7% q-o-q due to lower sales volume. EBITDA grew 16% y-o-y to US$124m in 3Q20 on higher CPO prices.
  • Despite higher CPO prices, PATMI recorded a loss of US$5m in 3Q20 as compared to a profit of US$0.8m in 3Q19. On a q-o-q basis, PATMI losses were narrowed in 3Q20.


Weaker-than-expected FFB production

  • Golden Agri Resources’ business benefitted from the recovery in CPO prices which rose 29% y-o-y in 9M20. Sales volume, however, fell 8% y-o-y in 9M20 due to tight supply availability in the industry. Recall that FFB yields were impacted by drought weather, lower application of fertilisers by farmers in 2019 and Golden Agri Resources’ replanting program.
  • Management lowered their FFB production guidance for FY20 from -5% y-o-y to a decline of 5-10% y-o-y but expects a better 4Q20 as peak harvest season was shifted from 3Q to 4Q this year. For FY21, management expects the FFB production to grow 5-10% y-o-y.

Fair value estimate remains at S$0.13






Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2020-11-19
SGX Stock Analyst Report SELL MAINTAIN SELL 0.13 SAME 0.13



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