SINGAPORE (Nov 15): Both UOB Kay Hian and RHB are maintaining their “buy” calls on Golden Agri-Resources with target prices of 42 cents and 46 cents after its recent 3Q16 results.

In a Tuesday report, UOB analyst OoI Mong Huey notes that the recent 3Q16 results were within expectations. Earnings came in at US$219.7 million (S$310.6 million), reversing from a loss a year ago and bringing 9M16 earnings to US$353.3 million.

In the plantation and palm oil mills segment, EBITDA improved 40% quarter-on-quarter but is still down year-on-year, notes Ooi. Golden Agri also mentioned that total palm product output for 4Q16 is likely to be higher than that in 3Q16 and palm prices are trading higher now than in 3Q16.

RHB notes that the palm and laurics segment saw a turnaround with margins up 2.9% quarter-on-quarter to 3.7% in 3Q16. Golden Agri expects to be able to maintain margins of 3% on the back of improved prices and better cost efficiencies. UOB’s Ooi notes that supply is picking up in 4Q16 but refining margins are likely to be weaker than 3Q16.

“Overall, refining margins for 2016 would still be better than 2015’s,” says Ooi.

The oilseeds division also saw a reversal into profit, notes Ooi. However, Golden Agri does not expect 3Q16 performance to be sustainable, but margins should remain positive. UOB’s Ooi echoes the same sentiment, believing that the performance will not be repeated in 4Q16.

Golden Agri also recognised deferred tax income of US$215 million, from a change in accounting policy to take advantage of a lowered tax rate for revaluation of assets in Indonesia, notes RHB. Golden Agri expects another US$40 million to be recognised by year-end.

Shares of Golden Agri-Resources are trading flat at 39 cents.