Published September 9, 2009

Brokers' Take

Golden Agri-Resources
Sept 8 close: $0.48
PHILLIP SECURITIES RESEARCH, Sept 8

ABOUT 98 per cent of GAR's profits are derived from its plantation division. We are bullish on palm oil prices given the positive industry dynamics and believe that GAR is well-positioned to benefit from the high crude palm oil (CPO) prices.

GAR's current fresh fruit bunch (FFB) yield of 22.4 tonnes per hectare is above the industry average. This is done through optimal fertiliser application, field management techniques, oil palm breeding and selection, as well as research to cultivate seedlings with superior characteristics.

Filma and Kunci Mas, GAR's two leading brands of cooking oil in Indonesia have captured a significant market share of over 16 per cent in the branded edible oil category.

We are bullish on the palm oil industry on the back of 1) strong consumption demand from emerging countries; 2) tight soybean supply; 3) falling CPO production and inventory level and 4) likely occurrence of El Nino. We believe GAR is a beneficiary of high crude palm oil prices and it is a good proxy to CPO.

We initiate coverage at a fair value estimate of $0.53, which represents a 15 per cent upside from its last traded price of $0.465.
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