Friday, November 23, 2012
Golden Agri will continue to expand its palm plantation areas in the next year, mainly by focusing on acquisitions in Indonesia's Kalimantan. The move to snap up existing estates comes as Indon firms are finding it increasingly difficult to obtain new licenses from provincial and state govts due to stricter environmental rules that would have otherwise allowed them to clear land and grow oil palm trees. Adding a sense of urgency, Malaysia, the world's no. 2 producer, is forecast to run out of available oil palm land in another 2-3 years at a time when global consumption for the tropical oil is rising. Owning a substantial landbank in Indonesia will also ensure the group has enough feedstock to meet demand from its downstream palm oil refining business, which aims to boost capacity from the current 1.4m tons to 2.6m tons annually by end 2014. Golden Agri has total oil palm land area of 459,500 ha, of which some 225,000 ha are located in Kalimantan. The group is accelerating its growth through M&As and is looking to expand its plantations by 20,000-30,000 ha next year. To fund these expansion plans, the group issued RM1.5b Islamic MTN earlier this week, which is part of a 5-year RM5b program. There are also significant opportunities for oil palm development in Africa and the group has, through its fund Golden VerOleum, formed a US$1.6b partnership with the Liberian govt in 2010 to develop 220,000 ha of land but its infrastructure remains poor and available labour limited. The stock currently trades at a FY12 P/E of 12.3x with consensus target price of $0.76.