Caution has also returned to the Singapore stock market with investors looking for cues from company results, which are likely to be announced in the next few weeks. Sentiment was also hit as Asian stocks fell due to poor earnings from Wall Street giants.
At 10:35 a.m., Golden Agri shares were down 1.3% at $0.75 on a volume of 167 million shares. The stock rose 57% last year.
OCBC Investment Research in an Oct 26 research report says: “Golden Agri Resources (GAR) is likely to see a pretty decent 3Q10 performance, aided by the recovery in CPO (crude palm oil) prices in the later half of the quarter as well as higher CPO output from its estates.
Singapore plantation companies likely to report 2Q10 revenue rose on quarter due to seasonal improvement in palm fruit yields, but operating costs expected to rise more, resulting in compressed profit margins, says Daiwa, according to Dow Jones.
Daiwa notes all five Singapore-listed companies have plantations in Indonesia, which imposes export tax on palm oil producers. So with average monthly palm oil prices in 2Q10 higher vs 1Q10’s, selling costs also expected to be higher.
Credit Suisse cuts Indofood Agri Resources (5JS.SG) to Neutral from Outperform, reduces target price to $2.65 from $2.69 on expected fall in crude palm oil prices in 2011 despite spurt in 2010, says Dow Jones.
Deutsche Bank has cut Golden Agri-Resources (E5H.SG) target to $0.59 from $0.72 after lowering estimates for palm oil prices by 10% to MYR2,500/tonne ($1,079/tonne) for 2010, to MYR2,700/tonne for 2011, says Dow Jones.
UOB KayHian has maintained “market weight” on regional palm sector with crude palm oil prices to remain flat as palm trees now are at the start of higher production cycle, saying this may mean potential build-up in palm inventories, according to Dow Jones.
Singapore plantation stocks, which outperformed rest of market yesterday, are notably lower today as investors pocket gains amid uncertainty over outlook for crude palm oil prices.
“We continue to believe that CPO price is unlikely to stay above MYR3,000 per ton for long, as inflation worries may prompt the governments of China and India to release their stockpiles,” says CIMB.
OSK has raised Golden Agri-Resources’ (E5H.SG) target price to 68 cents from 63.5 cents, based on 15x FY10 P/E, after increasing FY10 earnings forecast 8.3% to assume higher palm oil prices on back of lower fertiliser costs.
The broker says the change to bottomline estimate also reflects lower corporate tax rate of 25% vs 30% previously. Cites high fertiliser cost as one key factor weighing on FY09 profitability (earnings down 56.1% at US$607 million ($854 million)), but notes highly-priced fertiliser has since been used up.
