Golden Hope hit by poor palm oil pricesMay 30, 2001(The Stars) - FIRST plantations losses. Golden Hope's (RM3.36)plantations and manufacturing divisions turned in losses in theJanuary-March 2001 quarter.We believe the RM8.8mil loss for the plantations division was the firstfor Golden Hope in recent history and the first from a major plantationscompany thus far in the current result season.We had forewarned of plantations losses due to depressed palm oil pricesas early as seven months ago. No production statistics were disclosed inthe result.Manufacturing not spared. Manufacturing (refining, wood-based) alsoslipped into the red with RM2.8mil losses after two years of profits. Webelieve that lower MDF prices and production volume have led to the poorshowing.Property development was the only bright spot, turning from RM8.4mil lossin October-December 2000 to RM15mil profit.The improvement came from Golden Hope's 100%-owned property developmentarm which launched a new property project, Kota Seriemas, near Nilai. Incontrast, its other property subsidiary under 62%-owned Negara Propertiesrecorded 43% drop in profit.Tough times still. We expect Golden Hope to continue to face difficulttimes ahead as palm oil prices remain depressed at around RM730 per tonnecurrently compared to its production cost of more than RM800 per tonne.We notice that Golden Hope is seemingly focusing on property developmentunder its wholly-owned subsidiary. Recently, it proposed to acquire 12pieces of land from Negara at RM89.1mil cash.That the acquisition was priced at a 14.4% premium to independentvaluation is unusual especially given the prevailing conditions of theproperty market.Dividend sustainable? While Golden Hope has maintained its interim netdividend at 3.6 sen (paid in April), there could be uncertainties on thefinal dividend especially in view of the latest plantations losses.In the previous financial year, it paid out 11.1 sen in final dividend.Note that its net cash balance has fallen further to RM638mil end-March2001 from RM679mil end-December and RM837mil in September. Continue toAVOID Golden Hope.