Golden Agri to splurge $409.3m to combat intensifying headwinds

Near-term volatility is expected to persist.

Golden Agri-Resources is releasing a hefty $409.3m from its war chest to combat intensifying headwinds in the palm oil industry.

According to OCBC, GAR plans to spend $177.3 (US$130m) to expand palm oil plantations via organic growth and acquisition and another $231.9m (US$170m) to extend product portfolio, distribution coverage and global market reach as well as logistic facilities to enhance its integrated operations.

GAR’s management cautioned that near-term volatility is likely to remain after the group reported that its net profit tumbled 63.5% to $155m (US$113.6m) in FY14.

“While we do not expect to see any positive catalyst in the near term, we note that the share price has corrected quite a bit and may have found a base at around S$0.40, suggesting most of the negative news has been captured. Nevertheless, we are paring our FY15 estimates by 5-13% to reflect the weak CPO outlook,” stated OCBC.