GMG

GMG: Announced lack lustre set of 2Q12 results which was in-line with bearish estimates. Rev at $273.8m, -5.1% YOY and -3.1% QoQ, while net profit at $11.5m, -36.2% YOY and -1.8% QoQ. On a brighter note Gross margins increased to 13.1% vs 11.1% YoY on back of Teck Bee Hang’s recovery. Drop in rev was largely attributed to lower rubber ASP during the qtr, which saw ASP -23.8% YOY and +2.8% QoQ to $4636/ton, in line with weaker prevailing natural rubber selling prices for 3 mths ended 30 June 2012 which persisted until early Jul, averaging at US$2,900 a wk prior to 26 Jul 2012. Grp managed to sustain sales vol, with 59,065 tons sold, +25% yoy and -5.8% qoq in increased tonnage from Teck Bee Hang. Going forward, grp note that it has completed its 35% acquisition into Siat on 17 Jul12. As such, profit from Siat will be consolidated as an associate from 3Q12 onwards. Siat recorded net profit of $60.3m) for FY11 Add however that demand for natural rubber from EU and USA continues to remain weak while demand from China is stable. Mgt is aware of the several macroeconomic factors which may affect Grp’s performance and will continue to remain focused on its fundamentals and core strengths. We note that grp’s fundamentals remains strong, with a net-cash position of $289m.