• Golden Agri Resources (GGR) (UNRATED) released its 3QFY21 results last Friday. On an annualised basis, GGR’s 9MFY21 core net profit was 56.8% above consensus estimates of US$328.3mil. GGR’s core net profit surged to US$386mil in 9MFY21 from US$9mil in 9MFY20 as revenue climbed by 46%.

• GGR achieved an average CPO price of US$702/tonne (RM2,900/tonne) in 9MFY21 compared with US$628/tonne (RM2,659/tonne) in 9MFY20. Indonesia’s CPO export tax and levy brought down GGR’s realised CPO price by US$345/tonne in 9MFY21 compared with US$55/tonne in 9MFY20.

• GGR expects its FFB production (group level) to increase by 7% in FY21E in spite of a strong 17% YoY expansion in 9MFY21. For FY22F, GGR’s FFB production is anticipated to increase by 5%.

• GGR’s FFB output in 4QFY21 is envisaged to be similar to 3QFY21. On a YoY basis, GGR’s FFB production in 4QFY21 may be lower than 4QFY20 as FFB yields were robust last year. We understand that GGR’s FFB output had already achieved its peak in 1HFY21.

• Excluding the impact of acquisitions, GGR’s FFB would have improved by 12% YoY in 9MFY21. Also although rainfall has been abundant at GGR’s oil palm estates in Indonesia, the group has not faced issues with FFB harvesting and fruit evacuation yet.

• GGR’s cash cost of CPO production is expected to increase by 10% to 15% in FY22F from US$300/tonne in FY21E. The rise in the cash cost of CPO production per tonne in FY22F is mainly due to a 50% surge in fertiliser costs. Fertiliser accounts for 20% to 30% of GGR’s cash cost of production. GGR usually purchases its fertiliser, twice a year.

• GGR recorded a cash cost of CPO production of US$291/tonne (RM1,202/tonne) in 9MFY21 vs. US$303/tonne (RM1,283/tonne) in 9MFY20. Cash cost of CPO production was US$293/tonne (RM1,229/tonne) in 3QFY21. GGR’s cash cost of CPO production is estimated to be US$300/tonne in FY21E.

• GGR replanted about 10,000ha of ageing oil palm trees in 9MFY21. The target for FY21E is between 10,000ha and 15,000ha. GGR’s replanting target for FY22F is envisaged to be 15,000ha to 20,000ha.

Source: AmInvest Research - 15 Nov 2021