Towards Financial Freedom
First Resources - Slightly Below Expectations
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
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