1. Healthcare

Singapore | Food Products
Asia Pacific Equity Research
GOLDEN AGRI-RESOURCES | SELL
MARKET CAP: USD 4.0B
2 Feb 2015
Company Update
AVG DAILY TURNOVER: USD 12M
STILL A SELL ON STRENGTH
SELL (maintain)



Fair value
S$0.440
add: 12m dividend forecast
S$0.010
versus: Current price
S$0.420
Rebound likely temporary
More near-term downside risks
SELL above S$0.45
12m total return forecast
Hit 52-week low of S$0.41
Golden Agri-Resources’ (GAR) share price recently hit a fresh 52-week
low of S$0.41 (on 22 and 23 Jan), no doubt weighed by the recent
pullback in CPO prices. As warned in our 14 Dec 2014 report, we
believe that the stock could slip to S$0.40 before stabilizing. Although
the stock did make a rebound shortly thereafter to S$0.435, we
believe that the worst may not be over.
Crude prices could see another leg down
For one, the persistent weakness in crude oil prices could continue to
weigh on CPO prices, given the bio-diesel link (which has since broken
down as it is even more unprofitable to process CPO or other
vegetable oils into bio-diesel). While crude prices are now hovering
between US$45 and US$48/barrel, some market watchers are not
ruling out another leg down for crude; some speculate that prices
could tumble to US$30/barrel, while others expect the weakness in
crude prices to be fairly prolonged (the expectation of a rebound in
crude has been pushed back towards end-2015 instead of mid-2015)1.
Analysts
Carey Wong (Lead) ● +65 6531 9808
[email protected]
Wong Teck Ching (Andy) CFA ● +65 6531 9817
[email protected]
Key information
Market cap. (m)
S$5,392 /
USD3,987
Avg daily turnover (m)
S$16 /
USD12
Avg daily vol. (m)
31.1
52-wk range (S$)
0.41 - 0.615
Free float (%)
50.0
Shares o/s. (m)
12,837.6
Exchange
SGX
BBRG ticker
GGR SP
Reuters ticker
GAGR.SI
SGX code
GICS Sector
Sluggish demand likely in winter months
Secondly, the demand for CPO is also expected to decline in the
winter months; this as palm oil will solidify at much higher
temperatures as compared to other vegetable oils. Thirdly, the prices
of competing vegetable oils like soy and corn are still on the soft side,
further reducing the substitution effect. Last but not least, the
expected growth in demand could be slower than expected, after the
cut in global economic growth expected for 2015, especially in China2.
7%
E5H
Consumer Staples
GICS Industry
Food Products
Massingham Ltd36.5%
Top shareholder
Relative total return
1m
3m
12m
Company (%)
-8
-17
-18
STI-adjusted (%)
-9
-22
-33
Price performance chart
Maintain SELL on strength
Although GAR’s share price is currently hovering around our
unchanged fair value of S$0.44 (based on 13.5x FY15 EPS, supported
by a strengthening USD), we do foresee more near-term downside
risk. As such, we maintain our SELL rating on the stock, especially
above S$0.45.
1
http://finance.yahoo.com/news/oil-etfs-investment-banks-cut192021071.html
2
http://www.bloomberg.com/news/articles/2015-01-13/world-bank-cutsglobal-growth-outlook-with-u-s-lone-bright-spot
Sources: Bloomberg, OIR estimates
Key financial highlights
Year Ended 31 Dec (US$m)
Industry-relative metrics
FY12
FY13
FY14F
FY15F
6,051.7
6,585.0
7,293.8
7,612.4
785.2
662.3
541.7
632.4
49.3
36.9
0.0
0.0
Core Net Profit
404.3
318.4
224.2
316.8
EPS (US cents)
3.2
2.4
1.7
2.5
na
na
2.0
2.7
Price/NTA (x)
0.5
0.5
0.5
0.5
EV/EBITDA (x)
7.0
9.8
11.8
9.6
15.2
25.8
24.6
20.4
3.9
2.8
2.0
2.8
Revenue
EBITDA
Bio-asset Revaluation
Cons. EPS (US cents)
Net gearing (%)
ROIC (%)
Note: Industry universe defined as companies under identical GICS classification
listed on the same exchange.
Sources: Bloomberg, OIR estimates
Please refer to important disclosures at the back of this document.
MCI (P) 004/06/2014
SELL (maintain)
OCBC Investment Research
Singapore Equities
Exhibit 1: Crude and CPO Price Trends
Source: Bloomberg, OIR
Exhibit 2: Correlation of 0.85 with CPO Prices
Source: Bloomberg, OIR
2
OCBC Investment Research
Singapore Equities
Company financial highlights
Income statement
Year Ended 31 Dec (US$m)
FY12
FY13
FY14F
FY15F
6,051.7
785.2
-115.8
49.3
677.8
-66.7
-24.2
611.8
409.6
404.3
6,585.0
662.3
-134.0
36.9
528.4
-89.3
0.0
430.0
311.3
318.4
7,293.8
541.7
-177.0
0.0
364.7
-90.1
0.0
303.6
224.2
224.2
7,612.4
632.4
-171.9
0.0
460.6
-76.4
0.0
429.2
316.8
316.8
Balance sheet
Year Ended 31 Dec (US$m)
FY12
FY13
FY14F
FY15F
Cash
Other Current Assets
Fixed Assets
Total Assets
Current Liabilities less Debt
Debt
Other Long Term Llabilities
Total Liabilities
Shareholders Equity
Total Equity and Liabilities
559.5
1,862.3
2,007.5
13,286.1
868.7
1,854.5
1,944.7
4,667.9
8,526.6
13,286.1
327.5
2,211.0
2,351.0
14,148.2
824.5
2,580.8
1,939.6
5,344.8
8,720.6
14,148.2
389.6
2,331.6
2,174.0
14,324.1
862.9
2,570.0
1,955.6
5,388.5
8,850.8
14,324.1
340.3
2,341.6
2,002.1
14,162.9
888.4
2,188.0
1,955.6
5,032.0
9,043.0
14,162.9
Cash flow statement
Year Ended 31 Dec (US$m)
FY12
FY13
FY14F
FY15F
766.4
-115.5
342.6
-370.5
-909.8
299.3
797.3
878.5
311.3
559.5
628.0
-286.6
18.3
-477.0
-852.2
0.0
744.0
612.1
-221.7
327.5
520.7
233.1
677.2
-400.0
-478.3
0.0
-10.8
-136.8
62.1
389.6
627.4
358.9
910.0
-350.0
-482.4
0.0
-382.0
-476.9
-49.3
340.3
Key rates & ratios
FY12
FY13
FY14F
FY15F
EPS (US cents)
Core EPS (US cents)
Core PER (x)
Price/NTA (x)
EV/EBITDA (x)
Dividend yield (%)
ROIC (%)
ROE (%)
Net gearing (%)
PE to growth (x)
3.2
3.1
10.4
0.5
7.0
2.8
3.9
4.8
15.2
-0.3
2.4
2.5
13.2
0.5
9.8
2.6
2.8
3.6
25.8
-0.6
1.7
1.7
18.8
0.5
11.8
1.7
2.0
2.5
24.6
-0.6
2.5
2.5
13.3
0.5
9.6
2.3
2.8
3.5
20.4
0.3
Revenue
EBITDA
Depreciation & Amortisation
Bio-asset Revaluation
Operating Profit
Net Interest
Exceptionals
Pre-tax Profit
Net Profit
Core Net Profit
Operating Profit
Working Capital Changes
Net cash from Operations
Capex
Investing Cash Flow
Change in Equity
Net Change in Debt
Financing Cash Flow
Net Cash Flow
Ending Cash Balance
Sources: Company, OIR forecasts
Company financial highlights
OCBC Investment Research
Singapore Equities
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The analyst/analysts who wrote this report holds/hold NIL shares in the above security.
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- OCBC Investment Research’s (OIR) technical comments and recommendations are short-term and trading
oriented.
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rating indicates total returns within +10% and -5%; a SELL rating indicates total returns less than -5%.
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Carmen Lee
Head of Research
For OCBC Investment Research Pte Ltd
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Important
disclosures