Golden Agri-Resources - RHB Invest 2020-11-23: Proposes To Acquire 2 Plantation Companies

GOLDEN AGRI-RESOURCES LTD (SGX:E5H)

Golden Agri-Resources - Proposes To Acquire 2 Plantation Companies

Golden Agri Resources (SGX:E5H) entered into two agreements last Friday: The first, to acquire a plantation company for USD208m, and the second to acquire via its Agri Fund, another plantation company for USD96m. We believe the price tags for both acquisitions are relatively fair, given its respective age profiles.
Maintain SELL, with unchanged target price of S$0.13, 10% downside.

The first agreement is to acquire a 100% stake in Centrino Investment Limited, an Indonesian plantation company with 27,600ha of planted landbank in East Kalimantan for USD208m. We understand the land is fully planted with palm trees averaging six years. There is also a mill on the estate, but no details were given as to the size of the mill.

The second agreement is to acquire, through its USD96m investment in Ascend Agri Fund Limited, a 100% stake in Woodside Financial Limited, an Indonesian plantation company with 5,800ha of planted landbank in Riau and South Kalimantan. We understand the land is fully planted with palm trees averaging 18 years. There is no mill on the land.

In terms of pricing, Golden Agri Resources is acquiring Centrino for approximately USD6,990/ha (assuming the mill is worth close to USD15m). As for Woodside, Golden Agri Resources appears to be paying a heftier price tag of USD16,550/ha.
We believe the prices for both companies are fair, given that Centrino’s landbank is still relatively young and Woodside’s is relatively older. The landbank pricing for Woodside is in line with average transactions for brownfield landbank in Indonesia of between USD10,000-20,000/ha.
Pricing for both acquisitions was based on net asset value of the assets based on market valuation, although no details were given.

In terms of funding, Golden Agri Resources will not have to pay anything further, as the USD208m for Centrino will be squared off by the outstanding debt owed to them by Centrino’s holding company, Ocean Energy Holdings Limited.
As for Woodside, the funding will come from Golden Agri Resources’s investment in Ascend Agri Fund, which will translate to a full redemption of the fund.

We make no changes to our earnings forecast for Golden Agri Resources, as we do not expect this acquisition to have a significant impact to earnings.
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Still SELL. We maintain our SOP-based target price of S$0.13 for Golden Agri Resources based on an unchanged EV/ha of USD2,300 for the plantation wing and an unchanged 0.5x P/BV for the downstream unit.
Golden Agri Resources’ P/E remains prohibitive, at 30x 2021F.

Singapore Research RHB Securities Research | https://www.rhbinvest.com.sg/ 2020-11-23

SGX Stock Analyst Report SELL MAINTAIN SELL 0.134 SAME 0.134