Golden Agri-Resources

Golden Agri-Resources (GAR): Counter has drifted down to $0.50 (based on 13.5x blended FY14/FY15F EPS) after posting a worse-than-expected set of 2Q14 earnings. However, at current levels, some of the negative news appears to be priced in. For one, soy prices – the main reason for the drag on CPO prices – appear to be bottoming. Secondly, plantation owners may get a modest boost from the absence of export taxes on CPO in Sep and Oct. Having said that, OCBC still see the need to reduce its FY14 CPO price assumption to US$760/ton (FY15 to US$800/ton), down around 3-5% as house sees reduced risk of an impactful El Nino effect on production in 2014 (probably a bit more in 2015). Subsequently, OCBC lowered its TP to $0.48, but upgrade its rating to HOLD.