GMG

GMG: Announced poor set of results which was below estimates. Rev at $282.6m, -0.1% yoy and -9.1% qoq, while net profit at $11.7m, -24.5% yoy and -29.9% qoq. Gross Margins fell further at 12.9% vs 14.8% yoy and 15.8% qoq, from further contributions from processing facilities by Teck bee Hiang. Poor results was attributed to a -27.5% yoy and -14.8% qoq drop in ASP of rubber price to $4,510/ton, despite Grp delivering a +37.9% yoy and +6.8% qoq increase in sales vol, largely from its Thailand and Ivory Coast operations, with tonnage from Teck Bee Hang for 1Q12 increasing 67.3% yoy, forming about 58.0% of total Group tonnage. Going ahead, mgt remains cautious citing that performance is dependent on several economic factors such as the macro‐economy, mkt prices of rubber and currency fluctuations. Whilst demand for natural rubber from European and USA markets is stablise, believe that demand from China markets will remain strong. We note that overall, grp’s fundamentals remain strong, wth grp in a net cash position of $333.9m, partly helped by its recent cash call. At current price, valuation appears steep, with grp trading at an annualized 24.2x FY12E P/E.