Golden Agri-Resources (GAR) reported a pretty weak set of FY14 earnings as expected. While revenue jumped 15.7% to US$7619.3m, or about 4.5% above our forecast, buoyed by the expansion of its palm downstream business; reported net profit tumbled 63.5% to US$113.6m, hit by fair value loss of S$133.7m for biological assets. Excluding this item, core earnings still fell 30.5% to US$221.3m, but was just 1.3% below our forecast.

GAR declared a final dividend of 0.177 S cent/share, versus 0.515 S cent in FY13. Going forward, management expects its operating performance to be affected by the fluctuating commodity prices, sustainability of the global economy, climatic conditions, as well as developments in China and Indonesia. It adds that is reviewing its oilseeds business strategy to improve operating performance, given that the operating environment in China remains challenging in the near to medium term.

We will have more after the analyst briefing. Until then, we place our Sell rating and S$0.44 fair value under review.

Source: OCBC Research - 27 Feb 2015