Golden Agri

Golden Agri: 1Q14 net profit of US$104m slipped 8% y/y, missing street expectations, as gross margin declined 4.6ppts to 20.4%, impacted by negative soybean crushing margin and compressed refining margin due to tight CPO supply. Revenue expanded 34% to US$1.9b, boosted by increased sales volumes from palm and laurics (+46%) following an expansion of downstream operations, improved production and higher CPO prices (+9% to US$865/mt), but partially offset by a 12% drop in oilseeds segment on lower average selling prices in China. The first quarter earnings and revenue met 25% and 27% of consensus full year estimates. Operationally, fresh fruit bunch production grew 4% to 2.2m tonnes, in tandem to palm product output to 691k tonnes. Management expects its oilseed operations in China to continue to be loss-making in 2Q14 as the supply and demand dynamics in the soybean market in China have yet to improve. Latest broker recommendations: UOB Kay Hian places Buy rating and TP of $0.70 under review CLSA reduced to Underperform and trim TP to $0.61 (from $0.63)