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GAR, shares to double
Target price SGD0.428
Last 12-month cashflow +USD 422 million

February 27th,, 2021
1 minute read

Sales
  • Sales jumped 9% in the second semester to USD 3.69 billion after +4% in the first semester.
  • Plantation revenue was up 37% & sales were 6% ahead of our forecast.
  • The average growth is now at 6%. We expect average growth of 3% in the next 12 months & sales to reach USD 3.9 billion by the second half 2021.

Cashflow
  • Cashflow was strong at USD 249 million in the second semester, up from USD 173 million in the first semester. The average semester cashflow is now at USD 211 million.
  • We use the average investment spending of USD 161 million which together with higher sales...
  • ...gives a forecast average free cashflow of USD 93 million in this next 12 months.

Palm oil sales jump 37%, strong cashflow, leverage still high, but shares to double...

Data & financial model
Balance sheet
  • The balance sheet leverage of cash minus total liabilities was still at -USD 4.29 billion in the second semester up from -USD 3.95 billion in the first semester & -USD 4.1 billion a year ago.
  • With our forecast cashflow & a dividend payout of USD 54 million...
  • ...the net cash will be at -USD 4.16 billion in 12 months time.

Profit
  • Net profit was USD 208 million in the second semester from a loss of -USD 146 million in the first semester.
  • The cash cost ratio of net profit add depreciation minus sales as a percent of sales was down to 90%.
  • We use an average 93% costs to predict the next 12 months profit will be higher, USD 180 million.

Value
  • GAR has paid out USD 465 million of capital in the last six years.
  • At the current market value of USD 1.7 billion, it’s 3.69X capital paid, 0.23X sales, 0.19X assets, 0.38X equity, with a 2% profitability & a 3% yield.
  • Our cashflow forecast is USD 185 million. At 1.6% with a 0.5X adjustment gives a higher target price, SGD0.428.
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