GMG Global

GMG Global: Annouced 4Q10 & FY10 results which were in-line, with 4Q10 rev at $144.8m, +136.9%YoY and +32.2%QoQ, while core Net Profit at $12.9m, +159.9% YoY but -20.1%QoQ. Result brings FY10 Rev to $418.6m, +132.3%YoY and Core Net Profit at $45m, +860.6%YoY….

Stronger sales rev was due to higher sales vol, +34.4%, with 97,548 tons sold for FY10 vs 72,759 tons in FY09, and higher ASP/ton, +73.3%, on back of rising global commodity prices.
For FY10, grp’s Pontianak subsidiary, PT GMG Sentosa contributed 19,807 tons for the first time to the Group’s total sales tonnages….

Declining Gross Margins however remained a concern, at 24% for 4Q10 vs 30.7%YoY and QoQ 28.4%, while on a full year basis, gross margins were flat YoY at 25%, which could be attributed to higher raw materials purchase costs, which averaged $3,218/ton for FY10 vs $1,870 for FY09…..

Going forward, grp remains upebeat abt prospects, notin that natural rubber price was averaging US$5,691 in the week preceding to announcement, and barring unexpected adverse global development, expect prices for 2011 to remain strong. Note that demand for natural rubber from European and USA markets is stabilising but the demand from China market continues to remain strong….

We note that at current price, valuation appears undemanding, with grp trading at 23x FY10 PE, vs its historical average of 32x. As grp continues ramping up production and on back of continued global demand for rubber, earnings could possibly be rerated upwards, as grp moves forward into the new financial yr. Grp will be recommending a dividend of 0.3c/share.