Golden Agri

Golden Agri: The integrated plantation group reported sharply lower 1Q15 net profit of US$17.2m (-83.5% y/y). Stripping out FX losses and fair value gains, core earnings sagged 48.3% to US$52.0m, forming 19% of full year consensus forecasts.

Revenue fell 18.9% to US$1.54b dragged by weakness across its three major segments, while EBITDA margin was trimmed 8.1% from 10.5%.

Revenue for the palm and laurics division fell 14.4% to US$1.4b, which was in line with lower CPO prices, despite higher volumes sold. EBITDA margin for the segment dipped slightly to 1.5% from 1.8%.

Upstream plantations and palm oil mills revenue (-32% to US$340.9m) saw weakness from lower CPO prices (-26.5% to US$865 per ton for average international CPO), and lower fresh fruit brunches and CPO production output at 2,114,000 tons (-5.7%) and 634,000 tons (-8.2%) respectively, which was affected by dry weather conditions experienced in certain regions of Indonesia. EBITDA margin for the segment fell to 29.5% from 34.2%

The oilseeds segment saw revenue down 36.2% to US$134.5m, mainly weighed by lower ASPs and crushing volume. Conversely, the segment recorded a positive EBITDA of US$2.3m as compared to a negative EBITDA of US$3.3, led by improvements in crushing margin.

Core operations aside, the group booked FX losses of US$35.0m versus a gain of US$3.2m from the previous year, due to the depreciation of the Rupiah versus the USD and fair value loss on forward foreign currency contracts. Bottom-line was partially buoyed by other operating income of US$11.7m (+180.2%), led by fair value gains of financial assets.

Going forward, the group will focus on improving its yield and cost efficiency, as well as optimising the integration of its downstream value chain. The operating environment for the oilseeds segment is expected to remain challenging, and the group will continue to review its business strategy to improve operating performance.

Balance sheet remains comfortable with adjusted net gearing of 0.20x and supported by positive operating cash flows.

The stock is trading at 15.7x forward P/E and 0.48x P/B.

Latest broker ratings:
CIMB maintains Hold with TP of $0.44
Goldman Sachs maintains Neutral with TP of $0.43
OCBC downgrades to Sell with TP of $0.35 (prev. $0.42)