One of the purest upstream play. Approximately 98% of GAR’s profits are derived from its plantation division. We are bullish on palm oil prices given the positive industry dynamics and believe that GAR is well-positioned to benefit from the high CPO prices.
Above industry FFB yield. GAR’s current FFB yield of 22.4 tons per hectare is above the industry average. This is done through optimal fertilizer application, field management techniques, oil palm breeding and selection, as well as research to cultivate seedlings with superior characteristics.
Sizeable market shares in Indonesia for branded edible oil products. Filma and Kunci Mas, GAR’s two leading brands of cooking oil in Indonesia have captured a significant market share of over 16% in the branded edible oil category.
We are bullish on the palm oil industry on the back of 1) strong consumption demand from emerging countries; 2) tight soybean supply; 3) falling CPO production and inventory level and 4) likely occurrence of El Nino. We believe GAR is a beneficiary of high crude palm oil prices and it is a good proxy to CPO. We initiate coverage with a BUY at a fair value estimate of S$0.53, which represents a 15% upside from its last traded price of S$0.465.
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