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Thursday, 22 April 2010

Global Palm Resources Holdings Limited

Golden Palm Resources Holdings Limited launched its IPO for 110 million new shares at $0.46 each. A pathetic 3m shares will be available for the public while the remaining 107m shares will be via placement.

The company is a producer of crude palm oil and palm kernels in Indonesia and its prospectus boasted that it has access to land banks suitable for future cultivation of oil palms.

Revenue in FY 2008 was Rp 267.7 billion (S$38.6m) and net profit was Rp 70 billion ($10.7m).  For the 9 months ended 30 Sep 2009, the revenue was Rp 2222.5 billion (S$30.6m) and net profit was Rp 144.4 billion (S$19.8m).  EPS for the 9 months adjusted for post IPO shares of 412.968m shares was 4.82 cents. Somehow it seemed odd that the company showed a 9 months profit in 30 Sep 2008 of S$22m but the profit dropped to S$10m by 31 Dec 2008. Seemed like there are last minute late adjustments / losses to the accounts in Q4 2008. Assuming that was a one time off adjustment in 2008 and that 2009 EPS for full year is a 'conservative' 5.28 Singapore cents, the company is listing at a PER of 8.7x.  The NAV per share post IPO is 26.7 cents, a 42% discount to its IPO price, thus investors have to note that they are paying a premium to the net book value of the company (which frankly, it is very difficult to value biological assets).

The market cap will be around $190m and the IPO will close on 27 April 2010 at 12pm.

Compared to its other peers like Indoagri, Wilmar and Kencana Agri, it seemed likes this IPO is priced to sell. However, Golbal Palm is not as established and well known that its other peers and is much smaller in terms of revenue.  A fair value PE of 10x-12x assuming unchanged EPS for 2010 will mean a price range of 52 cents to 63 cents. However, the recent listings so far have been fairly disappointing and looking at recent trend, it seemed to fluctuate within a plus/minus 10 percent range.  Personally, with only a 3m public float, the chances of getting it will be low and with such a low profit range, i would give this a miss if i am punting the IPO. I would prefer to stick to better names like Wilmar and Indoagri if i want some exposure to the palm oil sector.

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