Golden Agri

Golden Agri: CLSA expects earnings recovery as FFB production is expected to revert to historical levels in 2014. However, continued expansion into downstream is will incur more costs, and earnings contribution from downstream will take time. The IDX ruling that stocks need min free float of 7.5% to remain listed, with a 2-year time limit to comply. PT Smart (97.2% owned by Golden Agri) is expected to comply with this ruling (the alternative being to delist), so that they have an option to be classified as “Indonesian-owned”. The sell-down will see a 1.9-2.4% reduction in Golden Agri’s earnings. The stock is currently near break-up value, and CLSA sees limited downside, hence its upgrade to U/PF from Sell with unchanged TP of $0.53