Wednesday, April 1, 2015

Cigar puff counter? Golden Agri

This is a short post.

I believed Golden Agri has fallen to a price where it might be a good idea to pay more attention to it.

This is because:

1) They are reviewing their China business model, which is really a drag on their otherwise stable (although cyclical) business. If they sold it off, it might provide a short term catalyst. It is reported in their presentation and also in the edge.

2) Finally, Capex is tapering off. I was wondering why are they so aggressive in capex when the market is cool.

Projected capex:
2009: 200 mio
2010: 400 mio
2011: 450 mio
2012: 500 mio
2013: 550 mio
2014: 550 mio
2015: 300 mio

Golden agri is behaving like a aggressive growth stock, but apparently, market is not giving it a growth stock valuation, it might be a better idea for it to increase dividends but improving FCF but managing capex and cutting the failing China Venture.

3) Cash buyback finally.

1,283,754,855 shares bought at about 41cents. 41 cents is not bottom price for recent time.

4) In the longer term, we are wait for the CPO price to turn, which is going to the dogs for years. Although the low crude price will affect bio-diesel demand, the bulk of CPO demand is still as a edible oil, and a processor for other food.

Risks:

1) The longer term demand of CPO as a vegetable oil. Look at the supermarket shelves.
2) Many substitutes, and their price is getting lower too, Canola oil etc.


Your money, my 2 cents break from my work, and a substitute to snacking for stress relief.

So follow at your peril.

CHILL...

Sillyinvestor

2 comments:

  1. Hi SI

    Hvnt taken a look in detail for commodities stock but from what gathered from the recent Noble and Olam attack issues:

    1.) Valuation for commodities is highly subjective and very different from how properties are being valued. So the low price to nav may be a trap and one needs to consider the consequences of impairment writedowns.

    2.) If I remember correctly the indonesian govt has recently imposed a tax on the producer of palm oil activities which might impact the margin for the company.

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  2. Hi B,

    I share your thoughts on that matter, especially the formula for calculating biological assets.

    I cannot which year AR contain that info already, but I remember the components include:

    Discount rate, 3 years Av. CPO price, etc.

    U know what, the best best part is the discount rate used for that 2 years of AR is different.

    I call it a cigar puff. I am not buying at current price. In fact, I am not buying anything. Just want to keep my sanity LOL.

    I have always wanted to take a deeper look at noble and really understand the attack.

    Noble cash generating ability just got better. I really want to dig deeper but cannot find the time.

    Another counter that warrants my further research when I have the time is MTQ. These are counters that of they fall about 10% I want to know if I have MOS.

    ReplyDelete