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Golden Agri Resources share price crashed to 10-year low

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Golden Agri Resources holds a special place in my heart. This is the only blue chip which I tried to trade and subsequently lost $1200 in a single day more than 10 years ago. I can still remember that raw feeling when cutting losses on this counter. At the end of the day, I knew that I had made a mistake and decided to move on. Incidentally, Golden Agri Resources share price hit a low of 10 year recently. So I decided to initiate a review on this palm oil producer.

On looking back, losing money in stocks is never a good feeling but I had gained a lot of valuable lessons. Firstly, I had mentioned that there is no such a thing as good or bad stocks because in life, there are only flawed or right strategies.

At that point of time, I suffered losses on Golden Agri Resources because I had not done sufficient homework. I had failed to see that Golden Agri Resources operate in a cyclical industry and the shares are therefore prone to volatility. If I had held on the stock for a few more years, I would have enjoyed substantial capital gain because Golden Agri Resources share price had ridden on the wave of high crude oil prices and surged to new highs.

Troubles come in troops

Fast forward a decade later, the operating condition is vastly different from then. In 2015, Golden Agri Resources was implicated in the worst haze in Singapore, leading the company to stop buying from a supplier alleged for causing the fire in Indonesia. The palm oil producer had denied the accusations and insisted that it maintained a zero-burning policy. Despite so, that episode had created an unwelcome negative publicity for Golden Agri Resources.

Golden Agri Resources

Subsequently, the Federal Reserves of United States began to deleverage its balance sheet, causing international funds to flow back to United States. Indonesia is one of the emerging markets currently struggling against this wave of capital flight as rupiah weakened in recent years. Net foreign exchange loss increased from USD3.7 million in 9M2017 to USD45.8 million in the current period. The increase was due to unrealised translation loss on foreign currency denominated monetary assets and liabilities as USD strengthened against IDR, Chinese Renminbi and Indian Rupee.

On the other hand, crude oil prices had come down considerably and ravaged the oil and gas sector. Similarly, Crude Palm Oil (CPO) prices are not spared either. During the nine-month period of 2018, CPO prices had weakened, dragging down Golden Agri Resources’ financial performance. At the current rate, if [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Updated: November 23, 2018 — 11:45 pm

5 Comments

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  1. Hi Gerald is it advisable to hold on to the shares? Your advice please?

  2. Hi Mr Lim,

    Thank you for your query. I shared the exact dilemma ten years ago. Back then, I cut losses because I lacked the holding power and needed the capital to cover my wedding expenses. Thus, I had sold the shares and missed the subsequent share price recovery.

    This time round, I do think that the share price could drop further once the full year results are announced in the coming months. If you are a long-term investor (with holding power) and holds a large amount of shares, holding on to the shares may be a viable option. This is after all, one of the established blue chips in Straits Times Index. The company had fallen on hard times recently but I expect the business to recover based on the previous 10 years record.

    However, I think the upturn may be 2 -3 years down the road. So you probably also need to weigh the opportunity cost of holding on to the shares. One thing for sure is that this is a highly liquid counter, therefore it will not be a zombie stock. In any case, please do your due diligence. This reply is not an advice. Thank you.

    Regards,
    Gerald
    https://www.sgwealthbuilder.com

  3. Thank you very much for writing about GAR. Your written benefits me a lot.

  4. Dear Mary,

    You are welcomed. All the best to your investment journey.

    Regards,
    Gerald
    https://www.sgwealthbuilder.com

  5. Thanks Gerald for your reply and sharing,

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