Golden Agri

Golden Agri: Announced good set of 1Q12 results which was in-line. Rev at US$1.5b, +4% yoy and +14% qoq, while net profit at US$162m, -30% yoy and +113% qoq. Ebitda margins at 16.6% vs 20.9% yoy and 13.6% qoq. Better performance in 1Q12 vs 4Q11 on back of a +8.2% rise in CPO prices to US$1,064/tonne, lower operating costs and lower export taxes in Indo. Compared to 1Q11, results were softer due to lower CPO prices by 12% from US$1,206/ton last yr. Higher fertilizer application and labor cost also contributed to the lower qoq performance. Grp was able to sustain yoy production growth supported by larger areas of mature plantations by approximately 27,700 ha. Palm products output for 1Q12 +3% to 618,000ton yoy, however, vs qoq, palm products output was -12% primarily resulting from seasonality, as 1Q is normally the lowest producing period of the yr. As at Mar 2012, total planted area was 455,800 ha, +2.8% yoy, remaining the largest CPO Producer in Indo. Age profile of grp’s plantations is favourable, comprising 28% of immature and young plantations, and 47% in their prime age. With a low average tree age of 13 yrs, grp is well-positioned to sustain long-term growth in production. Going forward, grp positive on prospects, noting sound fundamentals due to stable demand growth for vegetable oils for edible and alternative uses. Grp has budgeted capex of US$500m for the yr, for investments in upstream projects involving the expansion of plantation area and milling capacity, as well as investments in downstream projects to boost refining capacity and supporting facilities. At current price, valuations are undemanding, with grp trading at only 10.1x FY12E P/E, while gearing remains low at only 0.1x. Ratings as follow: Merrill Lynch maintains Buy with $1.00 TP Nomura reiterate Buy with $0.94 TP JP Morgan neutral with $0.75 TP