Golden Agri

Golden Agri (S$0.405): 4Q results disappoint as bottom line turned negative with net losses of US$21.9m (vs US$123.0m in 4Q13). Stripping fair value changes, FX changes and exceptional items, core net profit shrank 59.4% y/y to US$46.1m.

In the quarter, revenue slipped 4.2% to US$1.82b as on-track delivery of downstream business in Palm and Laurice (P&L) is offset by challenging environment in Oilseeds industry in China, and weaker production and CPO prices in Plantations and Palm Oil Mills (PPOM).

Upstream PPOM is the main disappointment, turnover reduced by 14% y/y as lower FFB yields resulted in lower production, while ASP remained in the doldrums.

Downstream, P&L performed well but segment EBITDA (US$10.0m, -78% y/y) was affected by start-up costs for new facilities and expansion in destination markets, Oilseeds saw a positive q/q turnaround to rake in US$1.5m (-91% y/y) segment EBITDA.

Core operations aside, fair value losses of US$133.8m was recognized due to the effect of lower CPO price assumption used in the present value of expected net cash inflows.

Financially, Golden Agri is still rather steady with net gearing of 0.28x and has good capability of generating net cash flows from operations. Its expansion of downstream businesses is also looked upon favourably.

Trading at 12x trailing core P/E and 0.44x P/B, the counter seems fairly valued compared to peers. It has 3 Buys, 8 Holds and Sells.

Latest broker ratings:
OCBC reiterates Sell with TP of $0.44
DBS issues un-rated report with TP of $0.46
Barclays reiterates Equal-Weight with TP of $0.50
RHB reiterates Neutral with TP of $0.50
Jeferries reiterates Buy with TP of $0.60