Stock Name: GoldenAgr
Company Name: GOLDEN AGRI-RESOURCES LTD
15 June 2011: Golden Agri-Resources - Higher CPO output expected this year
Summary: Golden Agri-Resources (GAR) was recently quoted by newswires as saying that its output of crude palm oil (CPO) could grow by >10% this year if weather conditions remain favourable. The group had earlier guided that it should be able to achieve a 5-10% increase in CPO production. Meanwhile, management was also quoted as saying that "there is continued tightness in supply, so whatever is produced by the sector in Indonesia and Malaysia is taken by the market", where China and India continue to be the group's core markets. We note that this is supported by the current market demand-supply situation, given that CPO prices have been fairly stable, despite the recent volatility in crude oil prices. While we are expecting CPO prices to ease in 2H11, we believe that the price decline would be more than offset by the expected production increase. Maintain BUY with S$0.96 fair value (based on 16x FY11F EPS).
Company Name: GOLDEN AGRI-RESOURCES LTD
| Research House: OCBC | Price Call: BUY | Target Price: 0.96 |
15 June 2011: Golden Agri-Resources - Higher CPO output expected this year
Summary: Golden Agri-Resources (GAR) was recently quoted by newswires as saying that its output of crude palm oil (CPO) could grow by >10% this year if weather conditions remain favourable. The group had earlier guided that it should be able to achieve a 5-10% increase in CPO production. Meanwhile, management was also quoted as saying that "there is continued tightness in supply, so whatever is produced by the sector in Indonesia and Malaysia is taken by the market", where China and India continue to be the group's core markets. We note that this is supported by the current market demand-supply situation, given that CPO prices have been fairly stable, despite the recent volatility in crude oil prices. While we are expecting CPO prices to ease in 2H11, we believe that the price decline would be more than offset by the expected production increase. Maintain BUY with S$0.96 fair value (based on 16x FY11F EPS).
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