Company Name: GOLDEN AGRI-RESOURCES LTD
| Research House: CIMB | Price Call: BUY | Target Price: 0.80 |
CIMB upgrades Golden Agri to Outperform from Trading Buy. “It is a good play on the theme of CPO price recovery given its strong liquidity and high earnings exposure to the plantations business.”
The house cuts its 2012-14 CPO price forecasts by 7%-9% to US$960-US$1,000/ton ($1,172-$1,221/ton) on US soybean crops’ recent upgrade and the fading El Nino.
But it still expects CPO prices will recover on slower output growth and improving demand, forecasting spot CPO prices to rise by 23% from the current US$780/ton to a 2013 average US$960/ton, although the timing may be delayed from its previous end-2012 to 1Q13 projection if demand stays soft on global economic uncertainty or supply exceeds its forecasts.
It cuts its target to $0.80 from $0.85 after lowering FY12-14 earnings forecasts by 3%-15% on lower CPO price assumptions and higher estate costs on Indonesia’s proposal to raise minimum wages. CIMB expects FY13 earnings to improve on fresh-fruit-bunch production improvement and better China agribusiness contributions, offsetting the higher production costs. The stock is up 1.5% at $0.68, extending Thursday’s 4.7% climb.
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