[ARCHIVE] Traders in Punters Gallery [TPG] - Mar 2013

[bignato]

Originally Posted by RoTi2

pennies.. once the play's over.. must pain pain cut it..

there's no other choice

was playing STX ..but made no $$...last week just bought pennies...then game over immediately

[RoTi2]

Originally Posted by bignato

was playing STX ..but made no $$...last week just bought pennies...then game over immediately

i also cut all last thursday n friday

[Kgm]

Originally Posted by bignato

not ah mar...IEV..stuck @ 60c

this one you stucked so long,

got so much time/chances to cut around 56c, even 585c i think

y dun cut?

[Newcastle]

STI close down 30

[Newcastle]

Originally Posted by Princess

why use life saving to buy ah ma......onli buy with spare cash ma.....

sometimes people calculate cannot compete with sky calculate...

[alftan]

Broad base selling, even good stocks also kena hit, lets see after Easter how....

[PrintMoney]

if singtel stops the telco service , uob kerbs stock buying, PUB stops pumping gas, SBS stops buses, SMRT stops trains.... this country is farked!

Who says there is no monopoly?

[xfactor]

Originally Posted by Kgm

this one you stucked so long,

got so much time/chances to cut around 56c, even 585c i think

y dun cut?

Bignato

I posted that the results are farked,,,

Why did u cut ...Early...closed at 45

[ezo]

Originally Posted by PrintMoney

if singtel stops the telco service , uob kerbs stock buying, PUB stops pumping gas, SBS stops buses, SMRT stops trains.... this country is farked!

Who says there is no monopoly?

monopoly is good for stocks....sure make money..
if dont make money,,just stop supplies...and the country hung..

[odie]

Originally Posted by PrintMoney

if singtel stops the telco service , uob kerbs stock buying, PUB stops pumping gas, SBS stops buses, SMRT stops trains.... this country is farked!

Who says there is no monopoly?

So funni

[xfactor]

UTDenv...dropped 5 cents to close at 64 after hitting a low of 63.5

More downside to 60 when funnies will be buying again

[xfactor]

Originally Posted by PrintMoney

if singtel stops the telco service , uob kerbs stock buying, PUB stops pumping gas, SBS stops buses, SMRT stops trains.... this country is farked!

Who says there is no monopoly?

If NOL stops its shipping services, then there will be no losses

[sacredmarket]

Actually, u brought up a very good point. UOB is the biggest brokerage in SG, if they curb a stock, sure there is impact compare to the small ones like Fraser and Lim&Tan.

They do not have monopoly by way being only player but monopoly by way of size.

Originally Posted by PrintMoney

if singtel stops the telco service , uob kerbs stock buying, PUB stops pumping gas, SBS stops buses, SMRT stops trains.... this country is farked!

Who says there is no monopoly?

[xfactor]

If Dow did not drop alot I expect HSI to have a 100/200 points bounce

[alftan]

Originally Posted by xfactor

If Dow did not drop alot I expect HSI to have a 100/200 points bounce

Thank you for the comforting news.

[Newcastle]

Consumer sector: Outperform STI in 2013?

Summary: Companies included in the FTSE Straits Times Consumer Services Index showed continued improvement in the 4QCY12 earnings season with both top and bottom-line figures exceeding consensus estimates. Revenue was stronger than expected (+10.3% over forecasts) while a combination of cost-control initiatives and favourable input prices during the period saw average earnings per share beat consensus projections by 16.6%. In our view, this mirrors the growth in contribution from overseas markets – particularly EM-Asia – as domestic retail sales figures were tepid during the same period. In the coming months, we continue to favour counters with greater EM-Asia exposure but urge investor caution as the recent upward re-rating of the sector has led to some counters being priced ahead of fundamentals. As such, we also maintain our preference for counters with defensive qualities like Sheng Siong [BUY; FV: S$0.69]. Maintain NEUTRALon the overall consumer sector. (Lim Siyi)

[Newcastle]

Rotary Engineering Ltd: JV deficit remains unresolved

Summary: Rotary Engineering Limited (Rotary) reported a second consecutive quarter of losses with 4Q12 net losses to shareholders of S$18.4m (3Q12: S$66m). Last quarter was marked by additional provisions made for its SATORP project and lower volume of work due to the late start of Fujairah Oil Terminal (FOT) project. FY12 revenue was down 16% to S$444m, while loss attributable to shareholders was S$80m, compared to profit of S$31m in the previous year. While the SATORP execution issues may be largely behind, the deficit at its JV remains unresolved. In a worst case scenario, Rotary – being the controlling shareholder – may need to take an impairment loss. Another concern is the tight labour market in Singapore, which represents about 50% of Rotary’s order-book. Maintain SELL with an unchanged S$0.34 fair value estimate. (Chia Jiunyang)

[nicholassschua]

Sifus and all members, I've got 2 questions. First is, when is this downtrend expected to bounce back up (STI 3200?) ? And, what is your outlook for the pennies in the short to mid term? Thank you all!

[Newcastle]

UOBKH

Courts Asia (COURTS SP, RE2) –
Beneficiary of higher disposable income
Last price: S$0.91
Target Price: S$1.14
The enhanced Workfare Income Supplement scheme should
lead to higher consumption and benefit retailers like Courts. The
full impact of Courts’ Tampines re-launch is still to come. Sales
have been on a positive momentum since Dec 12 and the
outlet’s average sales could improve by about 30%. It is on
track for its Indonesian venture in 2014 and management plans
to implement a cost-optimisation initiative to mitigate the
impact of pre-operating expenses for Indonesia. Courts is the
number one retailer in Singapore. Maintain BUY and target price
of S$1.14, based on 13x FY14F PE.
From a technical standpoint, the stock currently needs to hold
above S$0.86 and break above S$0.94 to test S$1.05.

[Newcastle]

Super Group (SUPER SP, S10) –
On a growth trajectory
Last price: S$3.99
Target Price: S$4.54
Super’s 2012 results exceeded our and consensus estimates.
Looking ahead, the group’s rebranding exercise and push into
China for the consumer branded segment will be its near-term
focus. We project free cash flow of more than S$100m annually
from 2014 onwards and we think there is scope for a higher
dividend payout in the absence of a major M&A or capex. We
raise our target price to S$4.54, based on 1x PEG, and implies
22x 2014F PE. We believe its improving brand equity, strong
free cash flow and firm market share in growth markets put the
group on a new growth trajectory. Its venture into China’s
coffee market could also offer a new long-term growth driver.
Technically, the stock is likely to head north towards its
immediate projected resistance of S$4.20 should it be well
supported above S$3.60.

[Newcastle]

UOBKH

CapitaMall Trust (CT SP, C38U) –
Watch for acquisitions in 2013
Last price: S$2.12
Target Price: S$2.54
The increased spending driven by higher disposable income will
also benefit retail REITs, especially in the suburban segment.
CMT will reap the rewards of its asset enhancement initiatives in
JCube, Bugis+ and the Atrium@Orchard. Watch out for potential
acquisitions in 2013 where possible targets include Star Vista
and the upcoming Bedok Mall. Secured commitments at
Westgate and Plaza Singapura point to higher occupancies and
rental upside ahead. 4Q12 results were in line with expectation.
Maintain BUY with a higher target price of S$2.54, based on
dividend discount model.
The stock may continue to trend up towards its potential
resistance at S$2.35 should it be well supported above S$2.00.

[Newcastle]

UOBKH

4Q12 Results Wrap-up – Broadly In Line. Be Selective
4Q12 results were in line as 57% were within expectations. Pockets of surprises include SingTel (-ve), CapitaLand (-ve), Super
Group (+ve) and GEN SP (+ve). We remain selective on the markets with a limited upside of 3,400 for the FSSTI.
Earnings misses peaked in 1Q12. Interestingly, the number of disappointing results peaked in 1Q12 at 38% and has been on a
declining trend (32% in 2Q12 and 29% in 3Q12) since. Most sectors had a mixed performance but the clear underperformer was
the developers, which suffered from more disappointing results (50% came in below our estimates).
Selective pickings in market. We remain selective on the market with a year-end target of 3,400 for the FSSTI. We see deeper
value in the mid cap space, particularly the oil services and consumer segment. Our top picks in Singapore are DBS, OUE, M1,
Ezion, Courts, Suntec REIT, Triyards and Ho Bee.

[Newcastle]

UOBKH

Plantation
2012 results wrap-up: FR and BAL continued to outperform peers. GGR and IFAR were dragged down by higher cost and lowerthan-
expected sale volume.
Mixed set of results. Singapore plantation companies under our coverage reported a mixed set of results with four companies in
line while two were below expectation. First Resources (FR) and Bumitama Agri (BAL) continued to outperform peers with
strong double-digit yoy growths in net profit for 2012, thanks to their young age profiles with FR delivering the smallest ASP
declined.
Lower ASP. Overall, companies reported lower ASP in 2012 by 4-10% and 4Q12 by 3-17% qoq (8-16% yoy). However, FR
emerged as the best performer with ASP only down 4% yoy vs its peers with 8-10% in 2012, thanks to high-price forward
contracts that were locked in during early-12. Some of these contracts will be delivered in 2013 as well.
Maintain UNDERWEIGHT. 1H13 results will be another volatile quarter on the adjustment to the new minimum wages and also
lower production season. Factors that could potentially offset rising cost would be the lower fertiliser prices. Overall fertiliser price
is about 10% lower and this is about 30% of the total ex-mill cost of production (the next large items after labour cost).

[Newcastle]

Spore Banking: 4Q12 Wrap - Pick banks with greater mortgage
exposure
Leng Seng Choon, CFA (+65 6232 3890, sengchoon.leng@sg.oskgroup.com)

DBS (S$15.11) Neutral (TP: S$15.00)
OCBC (S$10.10) Neutral (TP: S$9.60)
UOB (S$19.08) Buy (TP: S$22.60)

Uninteresting 4Q12 results, but home mortgage yields could rise with a
lag. The three banks recorded mixed set of results. DBS’ earnings disappointed
slightly due to weak fee & commission income and higher provisions. OCBC
results were in line, whilst UOB’s earnings beat expectations due to nonrecurrent
tax effects. The guided narrow NIMs will keep FY13 net interest
income subdued, despite likely high single-digit loan growth. Asset quality
remains good. We are NEUTRAL weight the banking sector. The Jan 2013
government property cooling measures would slow loan expansion, but provide
opportunities for banks to raise their average mortgage lending yields, albeit
with a lag of 1-2 years, and also to improve their asset quality. This will benefit
OCBC and UOB more, as they expanded their housing loan more aggressively in
recent years. Between the two, we prefer UOB as its discount to historical P/B
is wider than peers. UOB is a BUY with a target price of SGD22.60.
2013 loan growth to offset negative of NIM compression. NIM was
compressed by between 5 and 8 bps sequentially for the three banks, with stiff
competition for deposits cited as a common reason. However, loan growth of
between 2 & 4% sequentially (which included recovery in Greater China loans)
cushioned the decline in net interest income. NIM is expected to remain
squeezed in 1H13, and management guided FY13 loan expansion of high singledigit,
on the back of home mortgage drawdown. Overall, we see FY13 net
interest income as relatively unexciting.
UOB’s fee & commission income rose a robust 16% CAGR. UOB recorded
a 14.4% rise in FY12 fee & commission income, outperforming its peers of mid
single-digit. The momentum is also strong for UOB, with a 3-year fee &
commission income CAGR of 16%, in line with OCBC’s 18% (which incorporated
inorganic growth from ING Asia Pte Bank acquisition), and higher than DBS’
4%. This track record could continue with UOB plans to further boost its wealth
management business.

[Newcastle]

Ezion Holdings Company Update: Near-term Dilution; Positioning for
FY15 Growth (BUY, S$1.945, TP: S$2.48)
Jason Saw (+65 6232 3871, jason.saw@sg.oskgroup.com)
Lee Yue Jer (+65 6232 3898, yuejer.lee@sg.oskgroup.com)
Ezion made several key announcements in the past two days: i) a
USD45.3m Letter of Intent (LOI) from a South East Asian national oil
company (NOC) to provide a liftboat for two years; ii) placement of
50m new shares (5.5% of existing share base) at SGD1.895/share,
4.9% discount to its last close; iii) disposal of its 33.3% stake in OMSA
joint venture for AUD35m; and iv) the development of a marine supply
base in the Northern Territory of Australia in 3Q2013. Overall, we are
neutral as we expect 2-3% dilution to FY13-14F core EPS but 7.4%
accretion to FY15F core EPS. Maintain BUY with a revised TP of
SGD2.48 (old: SGD2.55) based on 16x FY13F EPS.
Latest LOI secured is effectively a one-year top-up to the LOI awarded
in Sep 2012. Ezion secured a USD45.3m LOI from a South East Asian NOC to
provide a liftboat for two years from 3Q2013. We believe the LOI is with
Petronas at the Bayan field. Ezion will acquire a new liftboat (Nora) for the
charter. The latest charter has a one-year overlap with an earlier LOI from the
same NOC awarded in Sept 2012, and is effectively a one-year top up to the
previous LOI, in our view. Ezion will move Nora out of the contract after one
year and the second year charter will be fulfilled by Liftboat 10. Nora will be
upgraded (USD30m capex) to prepare the liftboat for potential North Sea jobs
in 4Q2014.
Secured consent for marine supply base in Northern Territory in
Australia. Ezion will spend USD30m capex on the new marine supply base and
expect revenue contribution from 4Q2013 onwards. All the capex will be
incurred in FY13. The news is positive and we estimate net profit of USD3.5m
and USD6m in FY14-15F respectively.
Share placement and sale of OMSA raised USD110m to fund new capex.
Ezion raised net proceeds of SGD93.5m from a placement exercise (50m new
shares at SGD1.895 per share) and USD35m from the sale of its 33.3% stake
in OMSA to Pacific Basin and Skilled Group. The proceeds will be used for the
acquisition of Liftboat Nora (project price of USD110m) and USD30m capex for
the marine supply base. We estimate the exercise to ease its FY13F net gearing
by 10% from 1.1x to 1.0x.
Impact: 2-3% dilution to FY13-14F core EPS; 7% accretion to FY15F
core EPS. We revised FY13-15F core EPS by -2.5%/-2.3%/+7.4% respectively.
We assumed Nora to experience five months off-hire in FY14 due to upgrades
and expect marine supply base to start contribution in Jan 2014 vs. guidance in
4Q13 to provide potential delays.

[Newcastle]

Kingsmen Creatives: A record quarter; Good times likely to continue
(BUY, S$0.79, TP: S$0.93)
Lynette Tan(+65 6232 3895, lynette.tan@sg.oskgroup.com)
4Q12 PATMI grew 6.2% YoY to SGD6.4m, as revenue jumped 25.3% to
SGD102.1m. The results were in line with expectations. Besides the
record quarterly performance, Kingsmen also achieved a record high in
its cash balance (SGD53.1m). Kingsmen expects FY13 to be another
good year, backed by the strong demand for its services and Asia’s
growth as an events and theme parks destination. Management
declared dividend of SGD4.0¢ / share, which translates into a yield of
5.1%. Its pipeline of projects in the theme parks arena would keep it
busy over the next few years. Kingsmen trades at 8.4x FY13F P/E, or
5.4x ex-cash. As we roll forward our earnings, we have a revised TP of
SGD0.93, based on 7x FY13F earnings (ex-cash). Maintain BUY.
Huge cash hoard. Kingsmen maintains its strong balance sheet, with a net
cash position of SGD48.4m (or SGD0.25 / share). This healthy position, coupled
with its operations continuing to generate strong cash flows, would place
Kingsmen in a comfortable position to take on more projects. At the same time,
Kingsmen is also looking to build its own office building in Singapore, when its
current lease expires in 2016. This cash hoard could come in handy for this
purpose.
Outlook continues to be positive, backed by economic growth in Asia and its
importance on the world stage. More events and meetings are being set up in
Asia. More theme parks are also slated to be open in the region over the next
few years, targeting Asia’s rapidly growing middle class. Kingsmen is in a good
position to benefit from these trends, having done works for a number of
regional events and theme parks. As consumerism in Asia is still relatively
healthy, new malls are emerging, existing ones will continue to undergo
refurbishment and new international brands will try to penetrate the region.
This would benefit Kingsmen’s Interiors business. Its order book currently
stands at SGD81m, which is expected to be recognized in FY13.
Maintain BUY, TP raised to SGD0.93. We are estimating earnings of
SGD18.0m for FY13. Based on 7x P/E (ex-cash), we have a TP of SGD0.93, a
17.7% upside from current levels. Kingsmen will be conducting a briefing on 4
March. We will issue a further update, if necessary.

[Newcastle]

Noble: Results a little under; looking toward a better 2013 (BUY,
S$1.19, TP: S$1.45)
Joshua Low (+65 6232 3884, joshua.low@sg.oskgroup.com)
Noble reported 4Q12 PATMI of USD91m (-14% y-o-y, +21% q-o-q)
which came in slightly under our expectations due to losses from
supply chain assets and losses from associates partially offset by a tax
credit. FY12 reported PATMI grew 9% to USD471m. We fine-tune our
FY13 assumptions but bottom line remains largely unchanged. We
remain positive on Noble due to: (1) Recovery in agri and continued
expansion for energy to drive earnings, (2) cost savings from finance
and SAO (selling, admin and operating) costs. Maintain BUY with TP of
SGD1.45 based on 13.5x core FY13 EPS, equal to its five year historical
average.
Agri continues to disappoint, but recovery expected in 2013. Agri 4Q12
operating income from supply chain fell 90% y-o-y to USD11m (-84% q-o-q),
while its FY12’s was down 62% to USD180m. This marks agri’s worst quarterly
and yearly results (in terms of profitability) in the last six years. Poor
performance stemmed from weak grains/oilseeds volumes from the drought in
Argentina. This led to limited crush tonnage while still poor crushing margins in
china exacerbated the situation. We however, expect positives in 2013: South
American crop outlook appears strong and new oilseed crushing plants in Brazil,
South Africa and Ukraine will ramp up production. Sugar crush is expected to
grow as well, with four mills increasing crushing capacity by 27% to 13.6m
tonnes in 2013.
Strong performance for energy; expect further growth going forward.
Energy operating income from supply chain grew 35% y-o-y in 4Q12 and 31%
for 2012. This came from the energy coal and carbon complex division. We
think coal volume growth will continue, stemming from the Gloucester-Yancoal
merger as well as through new relationships in Indonesia, Australia, Mongolia
and Africa.
Cost savings in 4Q12 to follow through in 2013. SAO as percentage of
operating income from supply chain fell 2ppt to 46.5% in 2012. Management
had previously commented on eventual annual cost savings equivalent to
USD100m coming from improved management of SAO. Noble also reduced its
total debt by 8% to USD5.7b as of end 2012. With debt re-financing lowering
funding costs, coupled with a modest capex outlook, we expect overall finance
costs to moderate downwards as well.

[Newcastle]

Venture Corp: Invest for Earnings Growth (BUY, S$8.54, TP: S$9.40)
Edison Chen (+65 6232 3892, edison.chen@sg.oskgroup.com)
Terence Wong, CFA (+65 6232 3896, terence.wong@sg.oskgroup.com)
Venture’s 4QFY12 results came in largely within our estimates with
PATMI of SGD38.0m (-0.1% y-o-y, +16.6% q-o-q) and revenue of
SGD592.8m (-6.3% y-o-y, -2.6% q-o-q). The dividends cut from
55S¢/share to 50S¢/share came as a negative surprise which will
affect the short-term share performance. However, we are positive on
the move as the big capex plans ahead suggest a return to earnings
growth. Looking ahead, the group’s customers remain cautious in
1HFY13, but are more sanguine in the second half. Nonetheless, we
believe that the group is well position to capture the growth
opportunities once the global economy improves. Maintain BUY with a
higher TP of S$9.42, based on 15.2x blended FY13 earnings (5-yr
historical average forward P/E).
4QFY12 sales declined but margins improved. The decline of sales is due
to the strengthening of SGD as well as the normalisation of the Retail Store
Solution segment contribution. With the change of revenue mix towards the
higher margin products as well as the cost saving measures in place, 4QFY12
net margins increased 1.1ppts q-o-q to 6.4%, which we expect to be
sustainable going forward.
Dividends cut in view of the huge capex plan. We attribute the surprise
dividends cut from 55S¢/share to 50S¢/share as a result of the huge jump in
capex plan. Apart from the maintenance capex of SGD30m-40m, the group
committed to buy its current HQ for SGD38m so as to save from the escalating
rentals. On top of that, the group had plans for additional investments in
Penang and in Johor Bahru Malaysia. Hence, we expect the capex for FY13 to
jump three-fold y-o-y to SGD90m.
Well-positioned amidst uncertain outlook. Moving on, management
believes that business environment remains challenging, with inventory
correction plan in place. As such, we expect 1QFY13 results to be muted with
inventory correction. However, we believe that thanks to management’s efforts
in expanding customer base, enhancing productivity and rationalising operation,
the group is now well-placed to capture the growth once the economy
improves. Notably, the group added 12 new customers in 2012, gaining more
business in the high-barrier, high-margin Medical & Life Science space.

[Newcastle]

Nam Cheong: Four Bumi PSV L-o-Is Now Firm Contracts (BUY, S$0.26,
TP: S$0.34)
Lee Yue Jer (+65 6232 3898, yuejer.lee@sg.oskgroup.com)
Jason Saw (+65 6232 3871, jason.saw@sg.oskgroup.com)
Yesterday, Nam Cheong announced that four of its PSVs, formerly on
Letter-of-Intent since 20 Jun 2012, have now been converted to firm
contracts for delivery in FY15. We think that Nam Cheong’s current
valuations are extremely attractive – 7.6x FY13F EPS for the largest
OSV builder in the Eastern Hemisphere riding the global OSV cycle
upswing – and maintain our BUY call with a TP of SGD0.34.
Extended order book visibility. While there is little additional information
content, this does extend Nam Cheong’s order book visibility into FY15, and the
Build-to-Order nature of these contracts will help to stabilise future earnings.
Cash in the register. The conversion of the LOI into a firm contract implies
that Nam Cheong has received the deposit on the vessels. We understand that
the payment terms are 20% deposit and 80% on delivery – and that this
structure is back-to-back with the Chinese partner yard, which means that Nam
Cheong has a net cash inflow on the contracts (i.e. positive float). Imputing our
assumed 18.5% gross profit margin, we calculate that Nam Cheong now enjoys
a net RM14.6m additional cash balance.
Hungry Chinese yards are Nam Cheong’s gain. The shipbuilding industry in
China is starved for contracts, and to maintain employment the local
governments have pulled out all stops to support able shipyards with funding.
As such, the working capital requirement for Nam Cheong’s build-to-stock
programme (which for other companies building exclusively in their own yards
would be a huge drain on cash) is greatly reduced. From an operational point of
view – the minute Nam Cheong sells a vessel, that project becomes cash-flow
positive.
We would view further BTO orders and shipchartering contracts
positively for recurrent cash flow and earnings diversification. Nam
Cheong currently earns most of its income from its build-to-stock shipbuilding
programme. This trades off cash flow and earnings volatility in return for higher
margins. Given the operating background as described above, we see benefits
in a slightly larger proportion of build-to-order contracts which will ease the
earnings volatility and provide positive float.
That said, we see ship-chartering as a bigger opportunity to provide even more
of the same benefits – chartering margins are far higher (gross margins can be
in excess of 50% compared to shipbuilding under 20%), and the cash inflow is
much more consistent than waiting on lumpy order wins. In general, we are
seeing charter rates in the region rising, and to ensure a good return on
invested capital, Nam Cheong should enter into similar chartering partnerships
like the JV arrangement involving the accommodation workboat with fixed
charters of three to five years.
Valuations extremely attractive at 7.6x FY13F EPS. Maintain BUY with
TP SGD0.34. We see deep value in Nam Cheong, now trading at only 7.6x
current-year earnings. This is an extremely attractive multiple for a company
with i) an entrenched position as the largest OSV-builder this side of the world;
ii) almost the entire Malaysian OSV market share; iii) a strong industry
backdrop of an OSV cycle upswing after the massive rig orders last year; iv)
20%/16% EPS growth this year and next year; iv) Record net order book at
about RM760m. Our TP is based on an undemanding 10x FY13F EPS.

[Newcastle]

Golden Agri FY12 Results Review: Poor 4Q Drags Down FY12 (BUY,
S$0.65, TP: S$0.71)
Singapore Research (+65 6533 0781, research@sg.oskgroup.com)
Golden Agri (GGR)’s FY12 earnings were disappointing due to inventory
buildup in 4Q. The additional inventory will eventually be sold this year,
helping to boost its CY13 bottomline. We are maintaining GGR as a Buy
with our fair value lowered to factor in an increase in its share base.
Our earnings forecast remains unchanged. GGR will be the prime
beneficiary of a short-term rally in palm oil price, to be driven by
seasonal inventory downcycle.
Poor 4Q. GGR’s 4Q core earnings fell by 68.7% q-o-q on a 19% decline in
average CPO price and inventory buildup. The disappointing 4Q resulted in GGR
registering only USD404.3m in core net profit, falling short of consensus
forecast of USD481.7m and our forecast of USD496.6m. Realised CPO price fell
by 10.1%, which could have been absorbed by its 15.5% production growth in
the absence of logistics issue.
Inventory surge. At the end of 4Q, GGR held 520k tonnes of palm oil, which
was up significantly from 390k tonnes at end-3Q. The additional 130k tonnes, if
sold at its 4Q realized price of USD863 per tonne, would have resulted in extra
net profit of USD54.5m, bringing full year earnings to USD458.8m, which would
have been within consensus estimate but still slightly below our forecast.
Forecast unchanged. We are maintaining our FY13 earnings forecast of
USD458m. Although we have built in more conservative costs, this will be
mitigated by additional sales of 13k tonnes of palm oil.
A glance at GGR’s operational numbers. GGR achieved a 15.5% growth in
its nucleus FFB production in FY12. Oil extraction rate was down from 23.0%
for FY11 to 22.6% for FY12. During the year, the company did 13,600 ha of
total planting (including plasma), of which 9,700 ha were new planting and
3,900 ha were replanting. As of end-2012, GGR has a nucleus planted area of
366,914 ha, of which 328,423 ha are mature. Including plasma, its hectarage
stands at 463,426 ha.
Maintain Buy. We believe palm oil prices could enjoy some relief rally in 1H
this year as inventory eases off from now to May/June. Given its leverage to
CPO prices and good liquidity, GGR is perhaps the best stock to play the short
upswing in CPO prices.