Golden Agri Resources recently launched a €300m oleochemicals plant in Indonesia, opened by Sinar Mas Cepsa, a 50:50 JV between Golden Agri and CEPSA. Basic oleochemicals are produced from Palm Kernel and are then typically divided into fatty acids and fatty alcohols.

It has been reported that 160k tonnes of annual capacity is intended for fatty alcohol, which would be a first for the group. Fatty alcohol is used to make soaps, detergents and personal care products.

The group already has one oleochemical plant with an annual capacity of 240k tonnes, and as of FY16, sales of oleochemical products accounted for about 3% of overall revenue. As of 1H17, Palm and Lauric revenue was up 21% YoY to US$3.4b with EBITDA margin of 2.3%, in line with the past two years’ range of 2-3%.

The group continues to strive towards sustainable growth as they expand its portfolio with higher value-added products, as well as via investments such as higher-yield planting materials.

Separately, the group will be transferring the property units of Sinarmas MSIG Tower to PT Duta Cakra for a net cash consideration of approx. US$107.5m.

At this juncture, we keep our HOLD and FV of S$0.36.

Source: OCBC Research - 29 Sept 2017