Company Name: GOLDEN AGRI-RESOURCES LTD
| Research House: Phillip Securities | Price Call: BUY | Target Price: 0.77 |
Golden Agri is at a good entry point, with the selldown after the company’s announcement of plans for a US$400 million ($493 million) convertible bond issue overdone, Phillip Securities says.
While investors are likely to focus on the dilution effects near-term, the conversion price now represents an around 34% premium to the share price, it says.
The house notes management indicated the proceeds are intended for general corporate purposes as well as potential M&A, which GAR aims to close within three to six months, and greenfield investments; while management indicated most of the funds will be allocated for upstream Indonesian acquisitions, it is also looking for downstream M&A and joint-venture opportunities outside Indonesia, including in India and Europe, Phillip says.
It keeps its forecasts unchanged pending details on the bond proceeds’ use. It raises its fair value to $0.77 from $0.75, based on 12.5x P/E from 12.0x; it keeps an Accumulate call. The stock is down 0.7% at $0.67.
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