Global Palm Resources

OCBC on 7 June 2012

We have recently spoken with management of Global Palm Resources (GPR) to get an update after releasing its 1Q12 results which were mostly in line with our expectations. The group has kept its new planting target for 2012 at 1k ha; and it has planted some 166 ha in 1Q12. According to management, it still has around 2.7k ha available for future cultivation. It intends to spend IDR15.6b on plantation expenditure this year and another IDR35.9b on other capex – unchanged from its earlier guidance made after its 4Q11 results. While we are maintaining our HOLD rating with an unchanged fair value of S$0.19 (10x FY12F EPS), key risks include bigger-than-expected fallout from Europe and sharper-than-expected fall in crude oil prices.

1Q12 mostly in line
We have recently spoken with management of Global Palm Resources (GPR) to get an update after releasing its 1Q12 results which were mostly in line with our expectations. As a recap, revenue grew 12.0% YoY and 24.8% QoQ to IDR98.918b, meeting 27.3% of our full-year forecast. Net profit though fell 13.1% YoY and 76.8% QoQ (which also includes biological asset gains) to IDR12.9b, or around 23.4% of our FY12 forecast. However, we note that gross margin eased from 30.5% in 1Q11 and 31.3% in 4Q11 to 25.7%; this probably due to lower ASPs.

Watching cost pressures
In addition, cash cost has also risen in 1Q12 to IDR3277/kg, up from the average of IDR2489/kg in FY11; this mainly due to higher indirect material used (fertilizers), higher cost of upkeep and harvesting and increased cost of fuel. We note that it was also higher than management’s earlier forecast of IDR3087/kg for FY12. As such, we will continue to monitor the situation and make any adjustments in our margin assumptions later.

No change to 1k ha planting target
The group has kept its new planting target for 2012 at 1k ha; and it has planted some 166 ha in 1Q12. Currently, GPR’s plantation size is around 10.5k ha, with 58.6% at the peak production stage (7-18 years). According to management, it still has around 2.7k ha available for future cultivation. It intends to spend IDR15.6b on plantation expenditure this year and another IDR35.9b on other capex – unchanged from its earlier guidance made after its 4Q11 results. Meanwhile, GPR is sitting on a net cash hoard of IDR225b (as of 31 Mar), which is intends to use for M&As.

Maintain HOLD with S$0.19 fair value
While we are maintaining our HOLD rating with an unchanged fair value of S$0.19 (10x FY12F EPS), key risks include bigger-than-expected fallout from Europe and sharper-than-expected fall in crude oil prices.