GoldenAgri

GoldenAgri: Reported 2Q12 results which missed estimates. Rev at $1.3b, -16.2% yoy and -11.7% qoq, while net profit at $108.1m, -39.2% yoy and -33.3% qoq. Gross margins dropped slightly at 29.6% vs 31.4% yoy. Lower rev was attributed to lower CPO prices which dropped 9% yoy US$1058/ton, while at the same time, congested ports in Indo caused inventories to rise by 85,000 tons or 24% yoy, athough co. note that it was optimistic about selling off the increased inventory in the coming quarter. Operationally for the qtr, grp’s FFB production grew by 11% to $2.2m tons as FFB yield improved to 5.3ton/ha, +11% yoy. Total CPO and Palm Kernel output increased 4% to 642k tons. As at Jun12, grp’s totalled planted area was 457k ha, remaining the largest in Indo, with a low average age of 13 yrs in plantation. Going forward, grp remains positive on outlook, noting that long-term fundamentals are intact, although there are periods of volatility and demand for palm oil will continue to grow, supported by robust primary demand for edible oils and increasing need for substitution to palm oil as well as alternative uses, such asoleochemicals, specialty fats and biodiesel. GAR’s growth strategy focuses on balanced expansion in both upstream and downstream businesses to ensure optimal benefit from operating an integrated value chain. GAR has budgeted capex of US$500m this yr, to expand its upstream business in plantation area and milling capacity, as well as expansion in the downstream business to boost refining capacity and its supporting facilities. Grp’s fundamentals remain strong with a low net gearing of 0.13x. Ratings as follow: Deutsche maintains Buy with $0.90 TP HSBC maintains Neutral with $0.77 TP UOB Kay Hian maintains Buy with $0.90 TP.