- Steady  earnings.  FR's  3QFY13  earnings  jumped  48%  q-o-q  to USD60.7m,  bringing  its  9M  number  to  USD156.4m,  making  up  93%  of our  full-year  forecast.  Despite  the  lower  CPO  prices  this  year,  FR's 9MFY13 core earnings only contracted by 7% y-o-y.  

- Production  peaks  in  3Q.  The  company's  3QFY13  production  surged 37%  sequentially,  compared  with  Golden  Agri  (GGR  SP,  BUY,  FV: SGD0.60)'s  15%  rise  and  Bumitama  Agri  (BAL  SP,  BUY,  FV: SGD1.18)'s  3%  gain. Management indicated  that  as production  peaked in  3Q,  4Q  production  will  be  weaker.  Our  production  assumption  of 2.04m  tonnes  implies  that  4Q  output  will  come  in  5.5%  lower  q-o-q  at 581.6k tonnes.  

- Downstream  segment.  The  downstream  segment  posted  a  higher 3QFY13 EBITDA of USD3.1m vs USD2.1m in 2QFY13. This was due to an increase in sales volume as well as a  higher mix of  biodiesel, which offered  higher  margins.  Meanwhile,  9MFY13  refining  profit  shrank  46% due to the lower refining margin in Indonesia this year. Going into FY14, FR's downstream segment is likely to see a bigger biodiesel contribution as  it  is  one  of  the  bidders  for  Pertamina's  biodiesel  tender,  which requires delivery as early as Jan 2014.  

-Earnings  revision.  We  are  factoring  in  a  higher  Rotterdam  price premium  of  5%  vs  zero  previously  on  FR's  stronger-than-expected realised price. In addition, given that the  18.4% tax rate was lower than our previous projection of 25%, we are revising down our tax assumption to  20%.  These  changes  raise  our  FY13/FY14  earnings  forecasts  by 7%/9% to USD180m/USD212m respectively. The stock is trading at only 12x CY14 earnings, based on our revised numbers.

First Resources is an Indonesian planter listed on the SGX, with most estates located in Sumatra. It is involved in both upstream and downstream palm oil businesses.

Source: OSK