• Golden Agri Resources (UNRATED) (GGR) released its 3QFY17 results yesterday. The group's annualised 3QFY17 results exceeded consensus estimates of US$178.7mil for the full year. GGR's core net profit climbed by 80% YoY to US$216.5mil in 9MFY17.

• FFB production (nucleus and plasma) improved by 27% YoY in 9MFY17 while average CPO price rose by 6% to US$689/tonne (RM2,995/tonne).

• GGR believes that its FFB production would grow by 10% to 15% in FY17F (9MFY17: 27%). The group's FFB output in 4QFY17 is expected to be flat or marginally lower compared with 3QFY17. GGR is of the view that peak production had already taken place in 9MFY17.

• GGR estimates its FFB production growth to be 10% in FY18F. GGR reckons that production patterns would normalise in FY18F. As such, the percentage breakdown of FFB production between 1H and 2H is expected to be the usual 45/55.

• We understand that it has been raining at GGR's oil palm estates in Indonesia. However, the amount of rainfall is not abnormal. The expectation is that there may be a mild La Nina in the beginning of FY18F, which may be positive for FFB yields.

• GGR's production cost is expected to be US$300/tonne in FY17F. The group recorded a cost of production of US$296/tonne (RM1,287/tonne) in 9MFY17 vs. US$321/tonne (RM1,311/tonne) in 9MFY16. Production cost was US$283/tonne (RM1,207/tonne) in 3QFY17 compared with US$304/tonne (RM1,232/tonne) in 3QFY16.

• GGR is expected to replant about 7,000ha of ageing oil palm trees in FY17F (9MFY17: 3,100ha). Most of the replanting activities are anticipated to take place in 4QFY17. Previously, the target was 10,000ha for FY17F.

Source: AmInvest Research - 15 Nov 2017