• Above forecast & consensus
• Eyes US$550m capex
• HOLD with higher S$0.515 FV

Better-than-expected FY13 results

Golden Agri-Resources (GAR) put in a stronger-than-expected 4Q13 showing, with revenue rising 25% YoY and 21% QoQ to US$1901.8m, such that FY13 revenue grew 9% to US$6585.0m; this was 5% higher than our forecast and 15% above consensus. And because of better performance from China Operations and lower fertiliser cost, reported net profit jumped 129% YoY and 307% QoQ to US$123.0m in 4Q13; core net profit (excluding fair value gains and exceptional items) surged 212% YoY and 199% QoQ to US$113.5m. FY13 reported net profit though fell 24% to US$311.3m, and core earnings was down 21% at US$318.4m, 17% above our forecast (12% above consensus). GAR declared a final dividend of 0.515 S cent/share, bringing the total to 1.1 S cents (versus 1.19 S cents in FY12).

Outlook remains largely positive

Going forward, management remains largely positive about its prospects, supported by robust demand for edible oils, substitute and alternative sues such as oleo-chemicals and biodiesel. Barring unforeseen weather conditions, GAR believes that CPO production should revert to the usual 5-10% growth. However, it notes that its China Agribusiness' operating environment remains challenging in view of the intense competition. This year, GAR intends to spend US$250m for upstream activities, which include expanding palm oil plantations by 20-30k ha. For the downstream, it projects a capex of US$300m, with US$250m to increase processing capacity and US$50m to acquire vessels.

Revising FY14 estimates higher by 2-3%

In view of the latest results and developments, we opt to increase our FY14 estimates by 2-3%. Note that we are also increasing our CPO forecast for 2014 from US$830/ton to US$835. Based on an unchanged 13.5x peg against our new FY14F EPS, our fair value improves slightly from S$0.50 to S$0.515. Maintain HOLD for now.

Source: OCBC Research - 3 Mar 2014