Golden Agri: IIFL initiate with Add and TP $0.79. House add that Co. on the path to produce sustainable oil expect Co. to deliver a modest 5-6% production CAGR over FY11-20. GGR is the most liquid proxy to CPO prices, with a correlation of 0.9 since 2008.
If CPO prices appreciate by 5% annually in the long term and yield profile of the palm plantation improves, discounted cash flow model suggests a fair value of $0.79 (12.2x FY12 P/E).
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