Goldman Sachs tips downside risks to Golden Agri’s earnings after its subsidiary, Sinar Mas Agro Resources (SMART), reported 3Q12 results.
It notes SMART, which comprised about 32% of Golden Agri’s 2011 fresh-fruit-bunch production and owns all of its refineries, reported 3Q12 core net profit excluding forex rose 1% on-quarter to IDR513 billion ($65.2 million), with 10% on-quarter FFB production growth and 29% on-quarter sales growth offset by EBIT margins’ decline to 10% from 2Q12’s 12%.
While noting SMART is only one part of Golden Agri’s operations, with its earnings trend not necessarily reflecting the wider group, GS adds the flat on-quarter performance indicates downside risks to its 2012 forecasts, which are in-line with consensus, especially if the refineries didn’t sell through and liquidate as much inventory as expected.
The house expects Golden Agri to report 3Q12 core net profit of US$151 million ($184.3 million), up 33% on-quarter, on seasonally higher production and strong volume sales offset by lower CPO prices; results are due Nov 12. Goldman keeps a Neutral call. The stock is down 1.6% at $0.62 with 59.5 million shares changing hands.
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