Analysts at CGS-CIMB Research and RHB Group Research have increased their target price for Golden Agri-Resources on the back of above-expectations earnings to 28.1 cents and 28 cents respectively, from 25 cents and 24 cents previously.
Analysts at UOB Kay Hian, however, have ceased their coverage on Golden Agri, with a last target price of 18 cents.
Golden Agri reported a 269% y-o-y improvement in EBITDA to US$828 million in 9M21, driven mainly by higher net crude palm oil (CPO) prices and production. The strong fresh fruit bunches (FFB) output was driven by the acquisition of 34 hectares of new estates as well as improved yields from its estates that were hit by drought last year, CGS-CIMB analysts Ivy Ng Lee Fang and Nagulan Ravi note.
Due to the change of biological cycle for FFB this year, Golden Agri expects FBB growth in 4Q21F to be flattish q-o-q, reducing its FY21 FFB growth guidance to 5%. In this case, FFB output in 4Q21F will be 20% lower y-o-y, RHB analysts highlight.
“As such, we lower our FFB growth to 6% (from 10%) for FY21F, but keep it at 3% to 5% for FY22F to 23F. Despite the lower growth guidance for FFB, management expects CPO growth to be higher at 7% y-o-y for FY21F, from higher external purchases. We have adjusted up our forecasts accordingly,” they add.
UOB Kay Hian analysts Jacquelyn Yow Hui Li and Leow Huey Chuen highlight that both Golden Agri’s upstream and downstream operations performed well on the back of strong sales volume. The total output of palm oil for 3Q21 and 9M21 had increased by 22%, which includes the acquired estates in late 2020.
See also: RHB initiates coverage on CSE Global with ‘buy’ call with TP of 58 cents
“Downstream sales volume had continued to increase by 10% q-o-q and 12% y-o-y in 3Q21 which we attribute to the benefit of Indonesia’s export levy structure, which benefits companies with higher margin. The downstream margin remains healthy at about 4% to 5%,” they add.
Golden Agri revealed that fertiliser costs have increased by 50%, which could raise its costs of production for CPO by 10% to 15% in 2022F from the estimated US$300 per tonne in 2021F. It is currently in the midst of tendering for 1H22 fertiliser requirements.
The company had also cut its replanting target to 10,000 to 15,000 hectares ha due to current high CPO prices, CGS-CIMB analysts note.
See also: Suntec REIT biggest beneficiary from MAS’s ‘looser’ leverage, ICR rules: OCBC
“We lift our FY21 to FY22F earnings per share forecasts to reflect our recently revised higher net CPO price (post export levy and tax) assumptions of US$756 per tonne in FY21F, US$682 per tonne in FY22F and US$643 per tonne in FY23F,” they add.
UOB Kay Hian’s last earnings forecasts for 2021F, 2022F and 2023F are US$414 million, US$232 million and US$181 million respectively.
As at 2.56pm, shares in Golden Agri were 0.05 cents higher or 1.85% up at 27.5 cents.
