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

GOLDEN AGRI-RESOURCES LTD (SGX:E5H)

Golden Agri-Resources - Slower Than Expected Recovery

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.

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.

We remain cautious on Golden Agri Resources given its weak earnings outlook and slower-than-expected recovery. Factoring in lower FFB forecast and lower cost assumption, we revise our PATMI forecasts for FY20/21 by -16%/-11%.
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.
After adjustments, our fair value estimate for Golden Agri Resources remains at S$0.13. SELL.

Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2020-11-19

SGX Stock Analyst Report SELL MAINTAIN SELL 0.13 SAME 0.13