Golden Agri

Golden Agri: At CIMB's recent NDR, questions revolved around the group’s recent oilseeds losses, margins prospects from its downstream division, CPO price outlook, and growth strategies. The performance of its China oilseeds unit could remain weak in 4Q but should improve in 2015. The unit is looking for potential long-term strategic partners to improve sourcing or distribution of its soybean products in China to boost performance. CIMB also gather that the margins for its palm and laurics business in Indonesia may remain compressed in the near-term due to overcapacity issues. The group explained that it expanded its downstream business mainly to reduce its dependence on offtakers (given its large CPO production) and take advantage of the more favourable export duties for refined palm products against CPO in Indonesia. The group also highlighted that it is still keen to grow its estates and is currently scouting for M&A possibilities. As for the CPO price outlook, it expects prices to remain range-bound till 1H15. CIMB believes that some of its estates were hit by the dry spell in 3Q, and this may negatively affect yields in 2015, though it is still too early to assess its full impact. House cites the unexciting earnings prospects in the near-term, due to lower CPO prices and downstream contributions, have already been priced-in with the recent share price corrections. House maintains Hold rating with TP of $0.50.