Towards Financial Freedom
First Resources - Strong Earnings Delivery Continues
First Resources (FR) delivered another year of strong earnings performance, beating our forecast and consensus estimates. We raise our FY14 earnings forecast by 6% to USD229m, which results in its FV being raised to SGD2.86 from SGD2.70 earlier. The stock is trading at 12x forward earnings, which is undemanding. Maintain First Resources as one of our key BUY ideas.
- Exceeding expectations. FR beat our FY13 core earnings forecast by 20% and consensus by 8%. Topline and EBITDA were in line with our forecast but interest expense was lower than we expected . Elsewhere, there was a significant surge in downstream profits in 4Q, which was due to biodiesel demand. FR raised its final dividend to 3.25 Singapore cents (2.75 cents in FY12), bringing the total dividend to 4.50 cents.
- Production growth. The company managed to chalk up a 6.5% nucleus production growth despite the adverse weather last year, thanks to the contribution from newly mature land and acquisitions. FFB yield suffered a significant decline from 23.0 tonnes in FY12 to 18.7 tonnes in FY13. Management expects yield to come in at 22 tonnes this year, with growth guidance of 5 - 10%. We are keeping our FY14 production growth forecast conservative at 3% given the weather uncertainty.
- Area growth. As at end FY13, FR had 148,727 ha of nucleus planted area of which 104,493 ha area mature. Including plasma, its planted area comes up to 170,596 ha. During the year, the company added 24,193 ha of new area of which 15,559 ha were new plantings and the balance were acquired.
- Marginal earnings growth. We believe FR will continue to do well this year due to higher production and lower cost (cash cost at USD220 -260 per tonne of CPO vs USD255 in FY13). However, given its strong FY13 performance, which had a lot to do with high priced forward sale, its FY14 earnings will only be marginally better at USD229m. Our FY14 forecast is raised by 6% to factor in slightly higher production and lower interest expense. FR is trading at undemanding 12x FY14 and 10x FY15 earnings. Maintain Buy.
Financial Exhibits
SWOT Analysis
Company Profile
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.
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.
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Source: OSK
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
