CFA Society Singapore
SINGAPORE (May 17): OCBC Investment Research is maintaining its “hold” call on Golden Agri-Resources with an unchanged target price of 34 cents, despite the palm oil plantation company making a “slow start to FY16”.
OCBC lead anaylst Carey Wong says in a Monday report that Golden Agri’s 1Q core earnings of US$40 million ($54.7 million) only met 17% of OCBC’s FY16 estimate. Similarly, 1Q revenue of US$1.49 billion falls short, meeting just 21% of OCBC’s full-year forecast.
Golden Agri had brushed aside softer average crude palm oil prices and lower output from El Nino-hit plantations to post 1Q earnings of US$94 million, reversing from losses of US$3 million in 1Q15.
Golden Agri expects to see its crude palm oil production fall between 10-15% this year, but Wong says “margins should remain stable” as the impact is expected to be mitigated by the rising CPO prices, supported by the bio-diesel mandate.
One reason for the more stable margins is having the benefit of a "destination book", where it is able to sell directly to the end customers, as opposed to selling to middle men previously.
Golden Agri-Resources is trading 1.37% higher at 37 cents as at 12.13pm.