Global Palm Resources (GPR) has slashed its planting target by >60% to 300-400 ha for 2012 as it now faces increasing difficulties in its negotiation with the local population. Instead, management continues to be on the lookout for acquisitions to boost its plantation size; and believes that the process to be easier now with the drop in CPO (crude palm oil prices). Nevertheless, we note that rising inventory levels could remain an issue which could see stockpiles rising further in 4Q12 and even 1Q13 due to continued strong CPO production and muted demand. Unless there is a sharp recovery in CPO prices or a sizable brown-field acquisition, we do not see any catalyst in sight. Maintain HOLD with an unchanged fair value of S$0.19 even as we roll forward our 10x peg from blended FY12/FY13 to FY13F EPS.
Slashes new planting target by >60%
Global Palm Resources (GPR) has added just 33 ha of new plantings in 3Q12, bringing the YTD total to 292 ha. According to management, the delay was due to the “increasingly more difficult” negotiation process with the local population. As a result, GPR has slashed its new planting target for 2012 to about 300-400ha, or more than 60% versus its initial target of 1000 ha. Note that GPR also slashed its planting target last year from 1.6-1.7k to 1.0k ha. Currently, it has about 2.6k ha available for planting. GPR adds that it is still exploring various opportunities for acquisitions, and it expects the process to be easier now with the drop in CPO (crude palm oil) prices. GPR is currently sitting on about IDR247.5b of net cash (as of end Sep).
Rising inventory levels another concern
Meanwhile, we note that GRP has ended with significantly higher ending inventory of CPO of 3.4k tonnes at end Sep, versus 1.1k tons at end Jun. Management attributed the large increase to market uncertainty over the past few months and also the high production of CPO since Aug; this resulting in a “wait –and-see” approach by buyers in a “downward trending market”. While GPR said that it has started to clear the excess inventory, the continued high production of CPO (which is likely to continue into Feb) could see its stock pile inching higher in 4Q12 and even 1Q13.
Still no catalyst in sight
9M12 revenue of IDR263.7b (down 1%) met 70% of our FY12 forecast, while net profit fell 5% to IDR48.5b, or 80% of our full-year forecast. As such, we will not be adjusting our estimates. Unless there is a sharp recovery in CPO prices or a sizable brown-field acquisition, we do not see any catalyst in sight. Maintain HOLD with an unchanged fair value of S$0.19 even as we roll forward our 10x peg from blended FY12/FY13 to FY13F EPS.
Global Palm Resources (GPR) has added just 33 ha of new plantings in 3Q12, bringing the YTD total to 292 ha. According to management, the delay was due to the “increasingly more difficult” negotiation process with the local population. As a result, GPR has slashed its new planting target for 2012 to about 300-400ha, or more than 60% versus its initial target of 1000 ha. Note that GPR also slashed its planting target last year from 1.6-1.7k to 1.0k ha. Currently, it has about 2.6k ha available for planting. GPR adds that it is still exploring various opportunities for acquisitions, and it expects the process to be easier now with the drop in CPO (crude palm oil) prices. GPR is currently sitting on about IDR247.5b of net cash (as of end Sep).
Rising inventory levels another concern
Meanwhile, we note that GRP has ended with significantly higher ending inventory of CPO of 3.4k tonnes at end Sep, versus 1.1k tons at end Jun. Management attributed the large increase to market uncertainty over the past few months and also the high production of CPO since Aug; this resulting in a “wait –and-see” approach by buyers in a “downward trending market”. While GPR said that it has started to clear the excess inventory, the continued high production of CPO (which is likely to continue into Feb) could see its stock pile inching higher in 4Q12 and even 1Q13.
Still no catalyst in sight
9M12 revenue of IDR263.7b (down 1%) met 70% of our FY12 forecast, while net profit fell 5% to IDR48.5b, or 80% of our full-year forecast. As such, we will not be adjusting our estimates. Unless there is a sharp recovery in CPO prices or a sizable brown-field acquisition, we do not see any catalyst in sight. Maintain HOLD with an unchanged fair value of S$0.19 even as we roll forward our 10x peg from blended FY12/FY13 to FY13F EPS.
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