GMG

GMG: Announced good set of 3Q11 results which was above estimates. Rev at $110.4m, +183% yoy and +8.3% qoq, while Net Profit at $24.4m, +49.3% yoy and +8.3% qoq. Gross Margins improved significantly at 15.3% vs 11.1% qoq, signifying good progress after the acquisition of Teck Bee Heng which increased grp’s processing facilities significantly.

Strong rev was attributed to higher ASP and Tonnage Vol. ASP at $5,636 per ton, +36.1% yoy but -7.4% qoq, while tonnage vol at 55,413 mt, +107.9% yoy and +16.9% qoq largely due to the contributions from Teck Bee Hang. Operating expenses however registered a 115.2% increase to $19.8 m in 3Q11 largely due to the inclusion of Teck Bee Hang’s expenditure, while grp registed tax gains of $1.4m from tax deffered assets.

Going forward, grp remains positive on outlook and expects demand for natural rubber from Europe and USA to stabilise while demand from China to remain strong and will actively seek both upstream and midstream opportunities.

We note that result brings 9M11 rev to $883.5m, +222.6% yoy, while net profit at $57.9m, +80.1% yoy, although grp had a one off gain of 16.1m. At current price, valuations are compelling, with grp trading at an annualised 11.2x FY11E P/E while balance sheet remains strong with grp in a net cash position.