Golden Agri share price in false dawn?

Is it the light at end of tunnel or another false dawn in the making for Golden Agri share price? As a palm oil plantation owner based in Indonesia, Golden Agri share price destiny is closely intertwined with the crude palm oil (CPO) price, which has collapsed for the past few years. Recent resurgent in CPO led many investors to believe that recovery of Golden Agri share price is on the way. But is this really the case or is it a bobby trap awaiting investors?

To put things into perspective, the only predictability of Golden Agri share price is its unpredictability. Against the backdrop of declining commodity prices, Golden Agri share price had been pretty volatile in 2018. To make matter worse, Indonesia rupiah plunged in 2018 as a result of rising US dollar, roiling Golden Agri’s businesses in the process. The challenging operating environment led to Golden Agri to record its first annual losses in 10 years.

Golden Agri share price

To rub salt into wound, arch rival Wilmar posted a net profit of USD1.27 billion for full-year FY2018. Given the wretched performance of Golden Agri, should investors run for their lives or keep faith with the management? In this article, I will share my insights on the growth prospect of this palm oil producer.

Golden Agri share price at cross-roads

Despite the woes and the collapse of Golden Agri share price (it was trading at $0.60 in 2014), what riled investors was the lack of share buybacks by the management for the past few years. The last share buyback was conducted in April 2015, which was almost four years ago. So for those who think that Golden Agri share price is currently undervalued, you might want to think twice before entering this counter (Net asset value stood at USD0.33, below the current trading price).

Somehow, the latest financial quarterly result might have heightened expectations for Golden Agri share price as Q4FY2018 saw a net profit of USD79 million, reversing a loss of USD29 million in Q4FY2017. The perceived “recovery” led to a minor surge in Golden Agri share price, which increased from $0.25 to $0.28 as of 5 March 2019. However, delving into the financial report, the data painted a different picture altogether.

On a year on year basis, Q4FY2018 reflected a plunge of 22% in operating profit to USD36.7 million. Revenue also collapsed 14% to USDUSD1.65 billion. However, net other operating income actually surged ten times to USD115 million. According to Golden Agri, the other operating income [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: March 6, 2019 — 12:37 am

5 Comments

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  1. Hi, Thanks for Sharing . Hoping that you can also look into Gallant Venture.

    Thanks

  2. Hi Mary,

    Sure, will do a research on Gallant Venture.
    Please stay tune and thank you for the support.

    Regards,
    Gerald
    https://sgwealthbuilder.com

  3. While I do not know too much about Golden Agri per se, I have been studying the palm oil market recently. I can maybe provide a basis here to hopefully let readers have a better understanding on recent developments. Palm oil like all commodities, is subjected to geopolitical & inherent cyclical influences. At the current moment, palm oil faces headwinds from Europe as they aim to cut down the use of the oil due to supposedly environmental issues. Whether if this is really the case or a case of protectionism as Europe also supplies alternatives to palm oil (e.g. rapeseed oil) is up to anyone’s interpretation. In addition, India which is another big importer of the commodity, had increased taxes on palm oil imports since last year. This is in a bid to support local growers with (maybe) the upcoming elections which will be held by this year in mind. However, the country has recently relaxed this tax but, it is still substantial. Perhaps, maybe a little silver lining to lit up the above doom & gloom commentaries is that the Indonesian government has started the B20 (mixture of 20% vegetable oil with 80% petrol) mandate last year to boost local consumption. Hence, this has helped to mitigate the lag in demand posed by geopolitical influences. Overall, the industry has definitely stalled in recent times with no immediate catalysts at the moment to spur growth at least in the coming quarter leading up to June this year. My take on this? Check out trade websites (I follow 1/2 at the moment) for updates on the commodity and the latest development. Also, follow the comments from various industry analysts (I follow 2 at the moment) to catch the latest development & forecasts.

  4. Hi RandomWalk,

    Thank you for your interesting insights. You seem to be very knowledgeable in the industry. Are you vested in Golden Agri?

    Regards,
    Gerald
    https://sgwealthbuilder.com

  5. Hi Gerald, thanks for the comment.

    I am not invested in Golden Agri but in another palm oil counter. It was a mistake as I went in at the high of the cycle without realizing it at that time. Where commodities are concerned, one has to be aware it is a cyclical industry and also, geopolitical factors play a part as well.

    I only read more about the industry for the past 2 years to know more about it so as to keep track of the counter I am invested in. Charts showed an interesting cyclical pattern though but I am not too confident of the thesis at the moment.

    I will maybe present the thesis if my observations are validated.

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