Singapore’s Big Loser for the Week: Golden Agri-Resources Ltd

Golden Agri-Resources Ltd (SGX: E5H), the world’s second largest palm oil plantation company, has slumped by 7.8% in price since last Friday to close at S$0.47 on Thursday. Given that the Straits Times Index (SGX: ^STI) had increased by 0.6% in the same period, it makes the company a big loser in the Singapore market this week.

The firm announced its third quarter results on Wednesday. For the quarter ended 30 September 2014, total revenue increased 17.4% year-on-year to US$1.8 billion but net profit slumped by 85.7% to US$4.4 million.

For the nine months, total revenue went up 24% year-on-year to US$5.8 billion, mainly due to a 33.4% increase in revenue from Golden Agri’s palm and laurics segment. Revenue from this segment increased on the back of higher sales volume as a result of expanded downstream activities. EBITDA dipped 6.5% to US$431.3 million due to lower margin in the palm and laurics segment and the competitive environment in China for the oilseeds segment. The profit picture was bad as a result with net profit declining 28.1% to US$135.5 million.

Interestingly, Golden Agri’s latest results happened to be the worst quarterly report card it has handed in in 11 years. This is likely a big reason why the palm oil outfit’s stock price dropped to as low as S$0.46 (representing a 9.8% decline from its closing price last Friday) on Thursday.

However, despite the dismal showing, the firm’s Chairman and Chief Executive Officer, Mr. Franky Widjaja, remained upbeat. He commented:

“We are optimistic that palm oil industry remains positive in the medium term, even though the current prices are at the lower end of its five-year historical average. As the most cost effective vegetable oil with a wide range of uses, demand for palm products continues to grow, and plays an important role in mitigating the mounting pressures on sustainable food security with the rising world population.”

Golden Agri’s shares are currently trading at 16 times its historical earnings.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.