SINGAPORE (Nov 16): OCBC says Golden Agri Resources is still trying to rationalise a part of its China operations with an estimated book value of US$140 million ($190 million).
At the moment, OCBC is maintaining its “hold” on Golden Agri with a higher target price of $0.37 as 3Q17 underlying profit edges up on better weather and the house rolls over its valuations to FY18 earnings.
In a Wednesday report, analyst Low Pei Han estimates Golden Agri’s China ops to have a total book value of about US$500 million ($678 million). A significant portion of the book value Golden Agri is trying to rationalise relates to oil seeds processing in Tianjin.
The remaining US$360 million likely relates to the deep sea port and storage facility for oils and grains in Ningbo, oil seeds processing and refining facilities there, as well as the noodles business in China.
In 3Q17, Golden Agri saw a 3.0% y-o-y rise in underlying profit to US$79.5 million although revenue fell 2.9% to US$1.8 billion while net profit drop 80.1% drop to US$43.7 million on absence of one-offs which were present in the previous year.
In 9M17, PATMI was 70.8% lower at US$103 million, accounting for 70% of OCBC’s full year estimates but only 58% of Bloomberg’s FY17 consensus. The significant drop was mainly because of the recognition of deferred tax income on revaluation of US$242 million in the previous period. Underlying profit for 9M17 was 80.3% higher at US$217 million.
The plantations and palm oil mills segment delivered 3Q17 EBITDA of US$134 million, resulting in a 9M17 figure of US$378 million. This is 58% higher compared to last year, mainly due to rise in fruit production by 27% to 7.3 million tonnes, thanks to favourable weather conditions after the severe drought of El Nino in 2015.
For palm and laurics, 3Q17 EBITDA ended at US$43 million, leading to a 9M17 EBITDA of US$122 million. The latter was 10% lower than the same period last year as the segment was affected by higher input prices. As for the competitive oilseeds business in China, the segment contributed EBITDA of US$8 million in 9M17.
An interim dividend of 0.693 cent per share has been declared, representing 30% of GAR’s underlying profit.
Shares in Golden Agri are trading at 38 cents or 25.3 times FY17 earnings.
