- 3Q14 net profit of USD154m in line. Agriculture its biggest growth driver. Energy & Metals still under challenges.
- Lower EPS by 2-3% for Agriculture’s deconsolidation after spinoff. GGM TP down to SGD1.28 from SGD1.47.
- Maintain HOLD for lack of near-term catalysts. Recommend Wilmar for sector exposure.
3Q14 net profit grew almost six times from last year’s low base to USD154m. This matched our USD150m forecast. Segmental performances were broadly what we expected. Agriculture’s operating profit rose 464% YoY, its biggest source of growth. Energy’s operating income disappointed, down 16% YoY. Metal margins stayed low. The main surprise was a special DPS of USD0.03, to be paid in Dec after Agriculture’s spinoff.
Pockets of strength & weaknesses
Energy’s margin decline was mainly due to a poor coal market. Coal’s slack was partly taken up by oil, gas & power, which has exceeded coal in YTD operating-income contributions.
In Metals, Noble wrote down the value of various iron-ore operating assets. However aluminium grew substantially, as we expected.
Agriculture’s robust recovery was spearheaded by a better soybean crushing and sugar business. Coffee was affected by price volatility.
Maintain HOLD
We lower our FY15E/16E EPS by 3/2% as we deconsolidate Agriculture after its spinoff in Oct. Our GGM-derived TP is adjusted accordingly to SGD1.28 from SGD1.47. Maintain HOLD as we remain cautious on hard commodity trading. Wilmar remains our top sector pick.
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