First Resources Adopts Half-yearly Financial Reporting

• Based on limited available info, First Resources (SGX:EB5)’s 1Q20 headline PATMI appears to come in below our/consensus estimates on low output and lower sales. We anticipate a much stronger pick up in 2H earnings on seasonally higher output, lower fertiliser costs and better downstream margins.
• First Resources remains a BUY with unchanged Target Price of SGD1.85 on 18x 2020 PER peg, its 5- yr mean. At ~12x 2020 PER now, First Resources trades below -2SD of its 5-yr mean.

1Q Headline PATMI Missed Estimates

• First Resources has discontinued its quarterly reporting (as permitted by SGX). Instead, it provided an executive summary of key financial and operational information on 1Q20 performance.
• It reported a 1Q20 headline PATMI of USD22m (+81% y-o-y, -31% q-o-q) which met just 19%/17% of our/market FY20 estimates. However, its EBITDA of USD54m (+38% y-o-y, -28% q-o-q) met 24% of our FY20 estimate.
• The y-o-y earnings growth was achieved on higher ASP which offset lower FFB output (0.63mt; -4% y-o-y, - 22% q-o-q). Overall lower sales volume was also impacted by lower purchases from third parties and a net inventory build-up of 8,000t in 1Q20 (compared to a drawdown of 17,000t in 1Q19).
• As for fertiliser, First Resources is on track with its programme as it has completed around one-third of its full-year fertiliser requirements in 1Q20. As for downstream, we understand it remains profitable in 1Q20 but without further details.

Keeping Its FFB Growth Guidance of 0-5% for FY20

• Operationally, First Resources’s 1Q20 FFB output met just 20% of our full-year forecast, but within historical trends as Q1 output is seasonally the weakest. First Resources maintains its guidance of 0-5% y-o-y growth for FY20 but now expects growth to be at the lower end of that range as 1Q20 was off to a slow start.
• We anticipate much stronger output in 2H20; we maintain our FY20 FFB output growth forecast of +5%.

Make No Changes to Our Earnings Forecasts

• We are keeping our EPS forecasts in the absence of available info to do a detailed analysis. We will await First Resources’s half-yearly reporting, especially on its achieved FFB output, to re-assess our earnings forecasts.

Source: Maybank Kim Eng Research - 24 May 2020