SG: Golden Agri-Resources Ltd: Upgrade to BUY

Stock Name: GoldenAgr
Company Name: GOLDEN AGRI-RESOURCES LTD

Research House: OCBC

Price Call: BUY

Target Price: 0.77

GOLDEN AGRI RESOURCES 14 May 2012

UPGRADE TO BUY -Decent start to 2012 -Outlook still mildly positive -Upgrade to BUY Golden Agri-Resources (GAR) reported its 1Q12 results last Friday, with revenue rising 3.8% YoY and 14.4% QoQ to US$1519.1m, while net profit fell 30% YoY to US$162.0m (but made a 113% QoQ recovery). But it was a strong 113% QoQ recovery. All in, with revenue meeting 26.8% and earnings 28.1% of our full-year forecasts, Going forward, GAR believes that the industry outlook remains resilient with robust demand growth for palm oil coming from both emerging and develops countries; prices are also likely to be supported by limited supply growth of other vegetable oils, especially soybean. With numbers coming in mostly in line with our expectations, we are keeping our FY12 and FY13 forecasts unchanged. Still based on 12.5x FY12F EPS, our fair value also remains unchanged at S$0.77. But we upgrade our rating from Hold to BUY as the stock price has corrected quite a bit since our previous downgrade which we believe should have captured quite a bit of the negatives.