We spoke recently with management of Global Palm Resources (GPR) to get an update after ending FY11 on a pretty weak note. Going forward, GPR expects to increase new plantings to 1.0k ha, after planting 951 ha in FY11. It adds that it is on the lookout for M&A opportunities, where it has an ample net cash balance of IDR215.8b as of end FY11. But higher cost of production could crimp margins, even though CPO prices have generally remained fairly resilient thus far this year. As such, we have adjusted our margin assumptions accordingly, lowering our FY12 revenue estimate by 3.8% and earnings by 9.9%. In line with the revision, our fair value eases from S$0.195 to S$0.19, still based on 10x FY12F EPS. But as the stock is currently trading at just 0.7x its FY11 NTA, we believe that further downside is likely limited. As such, we maintain our HOLD rating.
Uninspired FY11 finish
We spoke recently with management of Global Palm Resources (GPR) to get an update after ending FY11 on a pretty weak note. As a recap, FY11 revenue of IDR345.6b was 2.6% below our estimate, while core net profit of IDR57.8b was 5.5% below. GPR has declared a final dividend of S$0.002/share, versus S$0.0016 in FY10.
Revised planting target for FY12
The group also added just 951 ha of planting in FY11, or about 5% shy of its revised 1.0k ha target (previously 1.6-1.7k) for this year. Nevertheless, management has just bumped up its new planting target from 770 ha to 1.0k ha. All in, it expects to spend some IDR15.6b on plantation capex this year, down from IDR21.6b last year. In addition, the company has targeted IDR35.9b capex for infrastructure, up from IDR18.9b in FY11. Meanwhile, management reveals that it is still on the lookout for M&A opportunities – GPR has a net cash balance of IDR215.8b (as of end Dec 2011) which it can tap on.
Also expecting higher cost pressures
While CPO prices have generally remained fairly resilient, management is expecting higher cost of production this year, with cash cost likely to rise to IDR3087/kg, from IDR2585/kg in 4Q11 and IDR2489/kg in FY11. GPR explained that it is due to the higher budgeted fertilizer cost for FY12 of IDR28.0b (including compost), versus IDR14.9b in FY11; this as the new plantings would need more fertilizers in the infancy stage. As such, we have adjusted our margin assumptions accordingly, lowering our FY12 revenue estimate by 3.8% and earnings by 9.9%.
Trading at 0.7x NTA
In line with the revision, our fair value eases from S$0.195 to S$0.19, still based on 10x FY12F EPS. But as the stock is currently trading at just 0.7x its FY11 NTA, we believe that further downside is likely limited. As such, we maintain our HOLD rating.
We spoke recently with management of Global Palm Resources (GPR) to get an update after ending FY11 on a pretty weak note. As a recap, FY11 revenue of IDR345.6b was 2.6% below our estimate, while core net profit of IDR57.8b was 5.5% below. GPR has declared a final dividend of S$0.002/share, versus S$0.0016 in FY10.
Revised planting target for FY12
The group also added just 951 ha of planting in FY11, or about 5% shy of its revised 1.0k ha target (previously 1.6-1.7k) for this year. Nevertheless, management has just bumped up its new planting target from 770 ha to 1.0k ha. All in, it expects to spend some IDR15.6b on plantation capex this year, down from IDR21.6b last year. In addition, the company has targeted IDR35.9b capex for infrastructure, up from IDR18.9b in FY11. Meanwhile, management reveals that it is still on the lookout for M&A opportunities – GPR has a net cash balance of IDR215.8b (as of end Dec 2011) which it can tap on.
Also expecting higher cost pressures
While CPO prices have generally remained fairly resilient, management is expecting higher cost of production this year, with cash cost likely to rise to IDR3087/kg, from IDR2585/kg in 4Q11 and IDR2489/kg in FY11. GPR explained that it is due to the higher budgeted fertilizer cost for FY12 of IDR28.0b (including compost), versus IDR14.9b in FY11; this as the new plantings would need more fertilizers in the infancy stage. As such, we have adjusted our margin assumptions accordingly, lowering our FY12 revenue estimate by 3.8% and earnings by 9.9%.
Trading at 0.7x NTA
In line with the revision, our fair value eases from S$0.195 to S$0.19, still based on 10x FY12F EPS. But as the stock is currently trading at just 0.7x its FY11 NTA, we believe that further downside is likely limited. As such, we maintain our HOLD rating.
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