Golden Agri-Resources

UOBKayhian on 14 Jan 2015

FY14F PE (x): 17.6
FY15F PE (x): 15.2
Moderate FFB production growth. Its plantation upstream operation remains as the
main earnings contributor to GGR and we are expecting a 3-year CAGR of 4.4% on the
back of 4-6% FFB production growth, supported by its mature age profile. It has about
47% of prime age oil palm trees with an average age of 14 years. Going forward,
growth will be slow due to the slowdown in new plantings since 2010, in compliance
with the more stringent sustainability guidelines. FFB production in 2015 might be
affected by the drought in 2014. GGR has 46% and 51% of its planted areas located in
Sumatra and Kalimantan respectively.
4Q14 production to be weaker than usual. 4Q is seasonally a stronger quarter for GGR
but production might slow down for 4Q14 as a result of the dry weather. Production is
likely to be flat qoq and weaker yoy partially due to the high base in 4Q13. Nevertheless,
this is on track to meet our expectation of 7-10% for 2014. It has reported 9M14 nucleus
FFB production of 5.7m tonnes (+13.9% yoy). Although its 2014 production has
recovered from a marginal contraction of 5.3% yoy in 2013, production growth is unlikely
to exhibit the double-digit growth it achieved a few years back. This is mainly due to the
slowdown in new planting activities as well as most of its oil palm trees having reached
their prime age.
Maintain HOLD with new target price of S$0.48. The target price is based on 15x 2016F
PE, ie average of the last 5 years, and is in line with its Singapore peers’ valuation.