FIRST RESOURCES LIMITED
EB5.SI
First Resources - Lowering FY17 FFB Output Guidance
- First Resources has toned down its FFB growth guidance for FY17 to 10- 15% (from 15%), as output growth has slowed down faster than expected. Nevertheless, 4Q17 is likely to still be its peak quarter for the year, based on its current guidance.
- Going into FY18, new areas coming into maturity would help to support earnings and FFB growth – although this would be slightly offset by higher unit costs, as minimum wages and fertiliser prices are on the rise.
- Maintain NEUTRAL. Our unchanged SGD2.13 TP implies an EV/ha of USD13,500, in line with that of its peers.
Peak production quarter still to come.
- First Resources’ FFB output growth moderated in 3Q17, rising 7.9% YoY. This brought its 9M17 growth to 27%.
- Due to the delayed effects of El Nino, the company has reduced its annual FFB output growth guidance for FY17 to 10-15% (from 15% previously), despite recording a 27% YoY increase in 1H17. This implies that the peak quarter would still be in 4Q17, with production anticipated to be slightly higher QoQ.
- We leave our FFB growth forecasts intact, at 17.4%, for FY17.
New maturing areas to support FFB growth.
- For FY18-19, we are maintaining our 7-10% YoY respective FFB growth projection on the back of an additional 18,000ha of new areas coming into maturity in FY18.
- We estimate unit costs dropped by 9% YoY in 9M17. However, this could be levelled by the year-end, since First Resources has not completed its fertiliser application for the year yet. As such, we keep our cost assumptions of USD220- 230/tonne for FY17, in line with management’s guidance.
Downstream division margins are narrowing.
- In 3Q17, the company’s refinery operated at a 79% utilisation rate – similar to 2Q17 – with an EBITDA margin of 2.4% (vs 3% in 2Q17). The decline was due to lower selling prices as well as the lower pricing formula for biodiesel.
- We expect downstream margins to remain at 2-5% for the rest of the year.
Biodiesel realisation of 75% for May-Oct 2017 allocation.
- First Resources only realised 75% of its May-Oct 2017 biodiesel allocation of 38,000 kilolitres, due to an industry-wide slowdown in demand. For the Nov-Apr 2018 period, it has received an allocation of 35,000 kilolitres, which is down 8%.
- The company continues to record positive margins from these operations.
No change to forecasts. We leave our forecasts intact.
- Still NEUTRAL on this stock. Our TP remains at SGD2.13, based on an unchanged 2018F P/E of 13x, in line with its 5-year historical average. This implies an EV/ha of USD13,500, which is in line with that of its peers. Its peers are trading in the USD10,000-15,000/ha range.
- First Resources’ extensive exposure to Riau (67%) puts it at risk, in the face of weak weather-led productivity, while valuations look fair at current levels.
Singapore Research
RHB Invest
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http://www.rhbinvest.com.sg/
2017-11-15
RHB Invest
SGX Stock
Analyst Report
2.130
Same
2.130
