First  Resources'  9M14  core  earnings  were  mildly  below  our expectations despite the strong increase in biodiesel profit during the quarter. Maintain BUY, with our TP reduced to SGD2.36 (from SGD2.42), which still provides some 18% upside from current levels.  We trim our earnings forecasts by 8%/3% for CY14/CY15. '

Slightly  short.  First  Resources'  (FR)  9M14  core  earnings  came  in  at SGD118.3m, making up 75.6% of our full-year forecast. This was despite the  downstream  earnings  tripling  QoQ  due  to  stronger  biodiesel profitability.  

Trim FY14/FY15 earnings  estimates. We trim our  earnings forecast by 8%  for  FY14  and  3%  for  FY15.  Note  that  3Q  earnings  will  unlikely  be repeated in  4Q.  Our revised core earnings forecast of USD150m implies that FR will make USD32m core earnings in 4Q.  

Production  growth  still  commendable.  FR's  9M  nucleus  FFB production  was  up  by  10.9%.  However,  with  the  lower  oil  extraction achieved, nucleus CPO production was up by just 9.0%. There was also a further slowdown in October when  FFB production was down by 2.6% YoY.  Still,  as  our  4%  assumption  appears  somewhat  overly conservative,  we  tweak  it  up  to  5%.  We  believe  our  FY15  growth assumption of 7% is achievable especially from 2Q onwards.  

TP lowered to SGD2.36. We lower our TP to SGD2.36 (from SGD2.42), based  on  16x  CY15  earnings.  FR  still  offers  some  18%  upside  from current levels. Maintain BUY.

 

Source: OSK-DMG