Get a glimpse of Golden Agri's brewing M&A plans

It eyes boosting its planted area by 30,000 ha/year through M&A.

Here's what Nomura said in its recent plantations regional report:

We gathered that (1) Golden Agri is not carrying larger-than-normal palm oil inventories at this juncture, (2) it believes the recent fall in CPO price is excessive and expect prices to recover to where they are before the sharp decline.

It attributed the weak palm oil demand from China to high soybean crushing activities following aggressive buying of soybeans in 1H, (3) its rough estimate of the cost of palm oil certification is around US$2 per tonne, (4) it plans to raise its planted area by 30,000 ha per annum – 20,000 ha through new planting and 10,000 ha through M&A.

(5) Soybean crushing margins have improved slightly in China but remain at breakeven level, (6) its average cost of production for CPO is US$300 per tonne, and (7) the market price for planted oil palm estates in Indonesia is now around US$15,000-20,000 per ha.

Overall, there were no major surprises. We are positive on its plans to boost M&A activities to grow its operations.