Golden-Agri’s (GAR) 3Q20 results came in below ours and the street’s forecasts due to weaker-than-expected FFB production. 3Q20 revenue rose 3% YoY to US$1.6b while EBITDA grew 16% YoY to US$124m in 3Q20 on higher CPO prices. PATMI, however, remained in the red and recorded a loss of US$5m in 3Q20 due to foreign exchange losses and deferred tax expenses.

Management lowered their FFB production guidance for FY20 from -5% YoY to a decline of 5-10% YoY but expects a better 4Q20 as peak harvest season was shifted from 3Q to 4Q this year. For FY21, management expects the FFB production to grow 5-10% YoY.

Factoring in lower FFB forecast and lower cost assumption, we revise our PATMI forecasts for FY20/21 by -16%/-11%. Our fair value estimate remains at S$0.13. SELL.

Source: OCBC Research - 19 Nov 2020