Inventory continues to rise

Rising inventory remains a concern
Global Palm Resources (GPR) continues to see a rise in its inventory of CPO (crude palm oil), this time more than doubling to 7.7k tonnes from 3.4k tonnes at end 3Q12 (also up 19% YoY). We believe that the recent volatility in CPO prices may have kept buyers on the sidelines, as some market watchers believe that CPO prices have not bottomed. And with the continued high production of CPO (which is likely to continue into Mar as company expects FFB production to increase some 11% this year), GPR may see its stock pile inching even higher going into 2Q13.

Planting remains slow; bogged down by tough negotiations with villagers
As of end-2012, GPR only added 331k ha of new planting, coming in at the low end of its revised 300-400 ha guidance. According to management, the delay was due to the “increasingly more difficult” negotiation process with the local population. And with the process likely to remain so, GRP is again guiding for a new planting target of 300-400 ha. GPR still has about 2.6k ha available for future cultivation. Meanwhile, management continues to be on the look out for acquisitions in both existing plantations and for land. As of end-2012, GPR has around IDR263.4b of net cash.

Maintain HOLD with S$0.17 fair value
Recent FY12 results were slightly disappointing – GPR reported a net loss of IDR39.8b; but if we strip out the bio-asset fair value losses, core earnings would have come in at IDR51.5b, or 10% below our forecast. In view of the still muted outlook for CPO, we cut our FY14 forecast for revenue by 13% and core earnings by 12%; this also brings our fair value down from S$0.19 to S$0.17, still based on 10x FY13F EPS. Maintain HOLD.