Friday, September 23, 2011

Golden Agri

Golden Agri (GAR): Citi maintains Buy with $1.08 TP. Note that recent news flow suggests 3 key positive developments for GAR’, following Greenpeace allegations of unsustainable environmental practices. The developments are:

1) Nestle has resumed CPO purchase from SMART:
2) RSPO certification achieved for 15k ha of plantations and 1m in North Sumatra. This brings GAR closer to its overall target of achieving RSPO certification for the rest of its existing 433,200 ha of palm oil plantations and 42 mills by Dec 2015
3) Unilever may resume buying of SMART’s CPO following an 18-mth halt after the palm oil producer made improvements to abide by Unilever’s guidelines.

Add that with mkt cap of US$6.6b and ADT of US$46m, GAR is Indonesia’s biggest CPO Co. and most liquid stock in house Asean CPO space. Tip grp as a beneficiary of weakening rupiah and relatively stable CPO prices at US$1,000/t should help mitigate risks of higher costs.

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