Golden Agri is suffering from a heavy selldown. Anyone knows why? Wondering if 69 cents now is a good entry point for me...... Or better to wait until perhaps 66?
Golden Agri has kaput! Crude palm oil prices are weakening, and will weaken some more because ...commodity prices could soften as investors kena margin call on gold investments.
1) CPO prices has fallen close to 40percent from its peak of around 1200 usd. If u look at the CPO price history of 30 years, it usually hit a trough at around 30- 40% from its peak. While historical data is no guarantee for future performance, it does provide some margin of safety as of how much further it can go barring another full blown crisis.
The long term trend for CPO prices however. Has always been up, and surpassing previous peaks.
2) golden agri has managed profitability even during periods o falling CPO in the past, while core profits margin can be affected, they still managed to squeeze out a profits nonetheless.
3) reasons for not buying yet are:
1) main bug bear is really the valuation gain or loss of assets, although they are not affect cash but can sometime be as high as core profits. I have difficulty calculating how they come up with valuation gains although it is stated in the AR it is av of past 3 year CPO price , production minus costs. When I try around with different permutations, i can't get why certain years there are such high fair valuation gains and when some years it is low when production and CPO av is only gradually and mildly increasing ...
But given the CPO price has on a down trend from a peak base, I am afraid we might see valuation loss soon since production cannot be rammed up anything soon. (Reserve is low, ratio of prime plantations to old and young is decreasing for 10 years) they might need to replant soon or buy more plantations to reverse this trend.
Also, I still feel that market is due to for a correction soon and I have exhausted my ammo for regular investing(anytime), I will only unlock cash for further investment if market correct 5% or more.
I am just fat hoping that this 1-2 quarters will have poor earning reports due to the low CPO and valuation losses, and coinciding with a market correction, allow me to collect on the cheap.
Maybe I should not call myself greenrookie but cheapskate investor.
Greenrookie, on a scale of 1-10, if Golden Agri is 3 for certainty of outlook, then King Wan Corporation is 8.
Have you checked it out? Now 27.5-28 cents.
Took the plunge and initiate a small position yesterday.
After looking deeper, I realized golden agri is traded at a 30% discount to PB, as comapred to other plantation like first resources which is traded at a prenium to PB.
First resources has a better plantation tree profile and also slighly more favourable PE, but I think if golden agri investment in liberia is to bear fruits, golden agri can continue to grow too for years to come, its 220 thousand hectares concession is slighly less than half of what is planted now in Indonesia. As with investment in such countries, there is always an element of risk.
Hence the main bugbear about fair valuation should be managed by the already discounted price to PB and also cushioned by the potential of growth in liberia. (They just started planting last year, and is dealing with many teething problems), so earliest results will only show in 3 years time. Also, although Golden agri paid almost 50% higher price than sime darby to develop the palm industry in liberia, its still dirt cheap in terms of the 68 years of concession and the large amount of land (220 thousand hectures )
Like Yangzijiang, I bought this counter not expecting it to jump tomorrow, it might face volality in the short term, but I believe I have a decent safety margin since I am buying when people are avoiding the stock. Will collect more as long as nothing fundemental went wrong for this 2 companies
Not a buy or sell call, but an "advertisement" Follow at your own risk
cc. hi vivene, I did follow King wan in the forum, but i dun quite understand its many business,(lack of focus)and since I did not have the first mover advantage i will stay away. (I hate to chase after stocks unless it is still undervalued after the rise in price)
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Or better to wait until perhaps 66? 