Singapore | Food Products

Asia Pacific Equity Research

GOLDEN AGRI-RESOURCES | HOLD

MARKET CAP: USD 6.7B AVG DAILY TURNOVER: USD 33M 1 Mar 2013 Company Update

DISAPPOINTING FY12 SHOWING

Earnings 14% below forecast Inventory overhang remains Keen nearer to S$0.55

HOLD (maintain)
Fair value add: 12m dividend forecast versus: Current price 12m total return forecast
Analysts Carey Wong (Lead) +65 6531 9808 carey@ocbc-research.com Lim Siyi +65 6531 9824 limsiyi@ocbc-research.com Key information Market cap. (m) Avg daily turnover (m) Avg daily vol. (m) 52-wk range (S$) Free float (%) Shares o/s. (m) Exchange BBRG ticker Reuters ticker ISIN code GICS Sector GICS Industry Top shareholder S$8,344 / USD6,740 S$41 / USD33 61.4 0.59 - 0.805 50.1 12,837.6 SGX GGR SP GAGR.SI E5H Consumer Staples Food Products Widjaja Family 49.6% 1m 2 2 3m 2 -7 12m -8 -21

S$0.63 S$0.01 S$0.65 -2%

Disappointing FY12 results Golden Agri-Resources (GAR) reported a disappointing set of FY12 results. Although revenue was up 2% at US$6051.75m, or 7% above our forecast, reported net profit saw a 67.7% tumble to US$409.6m. Excluding bio-asset gains and other exceptional items, core earnings would still have fallen 29% to US$404.3m, or 14% below our estimate. GAR has declared a final dividend of S$0.006/share, bringing its total payout to S$0.0119, versus S$0.0184 in FY11. Inventories still rising as expected Besides the still-weak CPO prices (GAR achieved an ASP of US$975/ton versus US$1085 in FY11), the group continued to see another increase in its CPO stockpile. Inventory at end Dec has risen by another 8%, or 37k tons, to 520k tons, as demand from China and India remained sluggish. According to management, this is an excess of some 200k tonnes above its usual holding of ~320k tons. Nevertheless, GAR remains upbeat that it can reduce the surplus by end 1H13, citing a growing demand for bio-fuel as current CPO prices (<US$900/ton) already make it viable as an alternative for crude oil. Remains relatively upbeat about prospects Management also remains relatively upbeat about its prospects, as it still sees robust demand growth for CPO as an edible oil from emerging and development countries; CPO prices are likely also supported by the limited supply growth of other vegetable oils. For 2013, it plans to expand its plantations by 35-45k ha via organic growth and acquisition (already in talks to complete the purchase of 16k ha of mature plantation by 1H13). It expects to spend US$550m in capex to both expand upstream and downstream operations. Lower S$0.63 fair value We are lowering our FY13 core earnings forecast by 18% as we lower our margin assumptions; but with no change to our revenue. Still based on 12.5x FY13F EPS, our fair value slips from S$0.65 to S$0.63. We maintain our HOLD rating and would be buyers closer to S$0.55.
Key financial highlights Year Ended 31 Dec (US$m) Revenue EBITDA Depreciation & Amortisation Core Net Profit EPS (US cents) Cons. EPS (US cts) Core PER (x) Price/NTA (x) Net gearing (%) Dividend yield (%) FY11 5,952.9 891.8 -94.6 571.4 10.4 na 11.0 0.8 10.1 2.8 FY12 6,051.7 785.2 -115.8 404.3 3.3 na 16.0 0.8 15.2 1.8 FY13F 6,384.2 849.4 -147.2 499.4 4.0 4.5 12.9 0.7 11.0 2.3 FY14F 6,729.4 897.5 -157.2 538.2 4.3 4.7 12.0 0.7 5.6 0.0

Relative total return Company (%) STI-adjusted (%) Price performance chart
Shar e Pr i ce (S$ ) 0.92 0.84
`

Index Level 3900 3540 3180 2820 2460 2100 May-12 Aug-12 Nov-12 Feb-13

0.77 0.69 0.61 0.53 Mar -12

Fair Value
Sources: Bloomberg, OIR estimates

GGR SP

FSSTI

Industry-relative metrics
P er c ent i l e 0t h 25t h 50t h 75t h 100t h

M kt Cap B et a ROE PE PB

Company

I ndus t r y A v er age

Note: Industry universe defined as companies under identical GICS classification listed on the same exchange. Sources: Bloomberg, OIR estimates

Please refer to important disclosures at the back of this document.

MICA (P) 035/06/2012

OCBC Investment Research Singapore Equities

Exhibit 1: Interim Results Year to 31 Dec (In US$ m) Revenue Gross profit Gross margin EBITDA Depreciation & amortisation Operating profit Net interest Forex Associates Revaluation of bio assets Exceptionals Pre-tax profit Tax Minority interests Net profit Core net profit Core net margin

4Q11 1327.9 386.5 29.1% 180.9 -25.9 155.0 -13.3 -11.1 0.7 903.0 -3.5 1030.9 -273.5 -6.1 747.8 90.6 6.8%

4Q12 1518.6 360.8 23.8% 142.0 -32.2 109.8 -21.3 4.5 0.2 49.3 -24.2 118.3 -64.1 -0.5 53.6 36.3 2.4%

% YoY 14.4% -6.6% 0.0% 24.5% -29.1% 60.0% nm -68.6% -94.5% 595.8% -88.5% -76.6% -91.7% -92.8% -59.9%

3Q12 1672.5 398.1 23.8% 190.3 -29.6 160.6 -17.0 -4.6 0.0 0.0 0.0 139.0 -48.2 -1.2 85.9 89.8 5.4%

% QoQ -9.2% -9.3% -25.4% 8.8% -31.7% 25.2% nm nm nm nm -14.9% 32.9% -56.5% -37.6% -59.5%

Exhibit 2: Palm Production Statistics

1.9 1.8 1.5 1.5 1.3 600.0 500.0 400.0 300.0 506 200.0 100.0 0.0 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 447 668 581 651 450 503 712 608 603 650 687 701 618 642 0.6 0.4 0.2 0.0 1.0 1.3 1.2 1.0 798 853 1.2 1.5 1.5 1.4 1.4 1.4 1.6 1.7

900.0 800.0 700.0

2.0 1.8 1.6 1.4 1.2 1.0 0.8

P alm P ro ductio n (k to ns)

CP O Yield (to n/ha)

Source: GAR, OIR

OCBC Investment Research Singapore Equities

Company financial highlights

Income statement Year Ended 31 Dec (US$m) Revenue EBITDA Depreciation & Amortisation Bio-asset Revaluation Operating Profit Net Interest Exceptionals Pre-tax Profit Net Profit Core Net Profit

FY11 5,952.9 891.8 -94.6 903.0 1,700.2 -53.4 6.1 1,712.3 1,268.0 571.4

FY12 6,051.7 785.2 -115.8 49.3 677.8 -66.7 -24.2 611.8 409.6 404.3

FY13F 6,384.2 849.4 -147.2 0.0 702.3 -53.2 0.0 675.3 499.4 499.4

FY14F 6,729.4 897.5 -157.2 0.0 740.2 -39.5 0.0 726.9 538.2 538.2

Balance sheet Year Ended 31 Dec (US$m) Cash Other Current Assets Fixed Assets Total Assets Current Liabilities less Debt Debt Other Long Term Llabilities Total Liabilities Shareholders Equity Total Equity and Liabilities

FY11 277.0 1,604.8 1,758.9 11,837.4 721.7 1,085.8 1,917.4 3,724.9 8,025.0 11,837.4

FY12 559.5 1,862.3 2,007.5 13,286.1 868.7 1,854.5 1,944.7 4,667.9 8,526.6 13,286.1

FY13F 658.9 1,870.6 1,860.3 13,341.6 823.0 1,628.9 1,952.4 4,404.2 8,838.8 13,341.6

FY14F 987.4 1,904.3 1,703.0 13,596.6 862.5 1,501.0 1,952.4 4,315.9 9,175.1 13,596.6

Cash flow statement Year Ended 31 Dec (US$m) Operating Profit Working Capital Changes Net cash from Operations Capex Investing Cash Flow Change in Equity Net Change in Debt Financing Cash Flow Net Cash Flow Ending Cash Balance

FY11 953.6 -115.4 650.5 -387.1 -561.5 0.0 104.8 -18.7 70.4 277.0

FY12 766.4 -115.5 342.6 -370.5 -909.8 299.3 797.3 878.5 311.3 559.5

FY13F 780.6 268.6 1,000.3 -300.0 -550.0 0.0 -225.6 -351.0 99.3 658.9

FY14F 873.7 230.9 1,067.5 -300.0 -450.0 0.0 -127.9 -289.0 328.6 987.4

Key rates & ratios EPS (US cents) Core EPS (US cents) Core PER (x) Price/NTA (x) EV/EBITDA (x) Dividend yield (%) ROIC (%) ROE (%) Net gearing (%) PE to growth (x) Sources: Company, OIR forecasts

FY11 10.4 4.7 11.0 0.8 8.2 2.8 13.9 15.8 10.1 0.1

FY12 3.3 3.3 16.0 0.8 9.9 1.8 3.9 4.8 15.2 -0.5

FY13F 4.0 4.0 12.9 0.7 8.8 2.3 4.8 5.7 11.0 0.5

FY14F 4.3 4.3 12.0 0.7 7.8 0.0 5.0 5.9 5.6 1.5

Company financial highlights

OCBC Investment Research Singapore Equities

SHAREHOLDING DECLARATION:

The analyst/analysts who wrote this report holds/hold NIL shares in the above security.

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RATINGS AND RECOMMENDATIONS:

- OCBC Investment Researchs (OIR) technical comments and recommendations are short-term and trading oriented. - OIRs fundamental views and ratings (Buy, Hold, Sell) are medium-term calls within a 12-month investment horizon. - As a guide, OIRs BUY rating indicates a total return in excess of 10% given the current price; a HOLD trading indicates total returns within +/-10% range; a SELL rating indicates total returns less than -10%. - For companies with less than S$150m market capitalization, OIRs BUY rating indicates a total return in excess of 30%; a HOLD trading indicates total returns within a +/-30% range; a SELL rating indicates total returns less than -30%.

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