Golden Agri-Resources - UOB Kay Hian 2021-08-10: Unlocking Shareholder Value With Proposed IPO Of Its India Subsidiary Gemini Edibles & Fats

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GOLDEN AGRI-RESOURCES LTD (SGX:E5H)

Golden Agri-Resources - Unlocking Potential Shareholder Value With Proposed IPO Of Its India Subsidiary

Gemini Edibles & Fats to list on Bombay Stock Exchange

• In an 8 August announcement, Golden Agri-Resources (SGX:E5H) stated that Gemini Edibles & Fats (GEF), its 56.27%-held indirect subsidiary, had filed a draft prospectus on 7 August with the National Stock Exchange of India for a proposed listing on the Bombay Stock Exchange.
• Gemini Edibles & Fats (GEF), described by Golden Agri-Resources as one of the leading and fastest-growing edible oils and fats companies in India, plans to offer some Rs25b worth of shares, or around US$333m, in the proposed IPO.
• Golden Agri-Resources, which plans to sell shares worth some Rs7b, or US$100m, will remain as the single largest shareholder of GEF upon completion of the proposed IPO, and “for the foreseeable future”.

Comments

• We view Gemini Edibles & Fats (GEF)’s proposed IPO plan to offer shares worth US$333m as a positive move for Golden Agri-Resources, as its subsidiary being listed on the Bombay Stock Exchange will unlock shareholders’ value.
• There are two main stock exchanges in India, which are the National Stock Exchange of India (NSE) and Bombay Stock Exchange (BSE), both of which allow international and local investors. The only main difference between both is in terms of liquidity - Bombay Stock Exchange has lower liquidity. As a comparison, we look at the FMCG companies listed on both exchanges which are trading at an average of about 35- 40x P/E. Companies listed on BSE are valued at a slightly lower valuation as compared with NSE due to lower liquidity.
• GEF contributed about 5-15% to Golden Agri-Resources’s total core net profit in 2018-20. Hence, we reckon that the listing is a positive move for Golden Agri-Resources as it will unlock shareholders’ value.

Valuation & Recommendation

• Maintain SELL on Golden Agri-Resources with target price of S$0.18, pegging our target price at 0.37x 2022F P/B, which is 2 standard deviation below its 5-year mean P/B.
• See
  • Golden Agri-Resources's Share Price,
  • Golden Agri-Resources's Target Price,
  • Golden Agri-Resources's Analyst Reports,
  • Golden Agri-Resources's Dividend History,
  • Golden Agri-Resources's Announcements,
  • Golden Agri-Resources's Latest News.

Jacquelyn Yow Hui Li UOB Kay Hian Research | Leow Huey Chuen UOB Kay Hian | https://research.uobkayhian.com/ 2021-08-10

SGX Stock Analyst Report SELL MAINTAIN SELL 0.18 DOWN 0.190