Global Palm Resources

OCBC on 22 Aug 2012

Global Palm Resources (GPR) has kept its 1k ha new planting target for 2012, although new plantings to date has been slow – only planted 259 ha in 1H12 versus 444 ha in 1H11. GPR eyes inorganic growth to help meet its target and has IDR240.6b (as of end Jun 2012) for M&A opportunities. On another note, cash cost has risen further in 2Q12 to IDR3697/kg, up further from IDR3277/kg in 1Q11; this mainly due to higher indirect material used (fertilizers), higher cost of upkeep and harvesting and increased cost of fuel. We will continue to monitor the situation and while we are bumping up our FY12 revenue forecast by 3.8%, our earnings estimate only rises by 3.6%. Our fair value also remains at S$0.19, mainly due to the depreciating IDR against SGD, even though we push out our 10x valuation to blended FY12/FY13F EPS. Maintain HOLD.

2Q12 results tad ahead of forecast
Global Palm Resources (GPR) reported 2Q12 revenue rising 23% YoY and 8% QoQ to IDR106.4b, lifted by both higher sales volumes and ASP of CPO. As a result, gross margin improved to 35.8% in 2Q12 from 34.8% in 2Q11 and 25.7% in 1Q12. Net profit grew 3% YoY and 57% QoQ to IDR20.3b. For 1H12, revenue was up 17% at IDR205.3b, meeting 57% of our FY12 forecast; although net profit slipped 4% to IDR33.2b, it still met 60% of our full-year estimate.

Planted only 93 ha in 2Q12
On the plantation side, GPR only added 93 ha of new plantings, compared to 166 ha in 1Q12. In total, GPR planted 259 ha in 1H12 versus 444 ha in 1H11, but continues to maintain its new planting target at 1k ha for this year. GRP has 2.6k ha of uncultivated land bank that it can convert into oil palm plantations. It has also obtained land location permit for 7.2k ha in East Kalimantan. Capex remains unchanged at IDR15.6b for plantation expenditure and another IDR35.6b on infrastructure spending. Meanwhile, management reveals that it is still on the lookout for M&A opportunities – GPR has net cash balance of IDR240.6b (as of end Jun 2012) which it can tap on.

Maintain HOLD – eyes on rising cost
On another note, cash cost has risen further in 2Q12 to IDR3697/kg, up further from IDR3277/kg in 1Q11; this mainly due to higher indirect material used (fertilizers), higher cost of upkeep and harvesting and increased cost of fuel. We will continue to monitor the situation and while we are bumping up our FY12 revenue forecast by 3.8%, our earnings estimate only rises by 3.6%. Our fair value also remains at S$0.19, mainly due to the depreciating IDR against SGD, even though we push out our 10x valuation to blended FY12/FY13F EPS. Maintain HOLD.