Halcyon Agri

Halcyon Agri: 3Q13 net profit grew 9.7% y/y to US$3.5m, boosted by gross margins which improved to 13.8% from 10.4% a year ago, on the back of a 3.7% increase in sales volume. Revenue however, fell 15% to US$47.4m, in line with weaker natural rubber prices (-18.4%). Management believes that natural rubber prices will remain at current levels for at least the next 12 months. Nevertheless, the group remains confident that its business model and risk management approach will enable it to continue operating profitably in spite of volatile market conditions. As at end 3Q13, the Group had committed off-take of 26,575 tonnes for the remainder of the year. This means the contracted FY13e volume of 82,397 tonnes is 23% higher on a y/y basis, and should underpin the group’s performance. Management noted that the previously proposed acquisitions of CLS assets, JFL Agro and PT Golden Energi are expected to be on time, which would help the Group fufill its ambitions to become a top 10 global producer of natural rubber. Halcyon trades at annualized 9M13 P/E of 19.5x, contrasting its peer GMG Global’s P/E 24.6x. Halcyon trades at 3.5x P/B. Latest broker calls as follows: UOB: Buy, TP $1.00