FIRST RESOURCES LIMITED
EB5.SI
First Resources (FR SP) Results below expectations
Lacks catalyst for now
- 1Q16 results disappointed on lower-than-expected CPO ASP achieved and low output hurt by 2015’s El Nino.
- We expect sequential pick up in quarterly earnings but mainly in 2H16 when production recovers.
- Nonetheless, we cut our 2016-18F EPS by -16/-7/-7%. TP revised down to SGD1.70 (-18%).
- Our HOLD call is maintained.
1Q16 results disappointed
- FR announced a 1Q16 core PATMI of USD5m (-78% YoY, -75% QoQ), which met just 4% of our and consensus full-year estimates.
- The shortfall was due to
- 2015’s El Nino which hurt 1Q16 FFB nucleus output at 439,311 MT (-15% YoY, -34% QoQ), and
- low CPO ASP achieved at USD476/t (- 24% YoY, +3% QoQ).
- Even after accounting for USD50/t CPO export levy (effective 16 Jul 2015), the ASP proceed was still USD50/t below market price. FR explains that this was, in part, due to the one month lagged effect in sales recognition whereby the recent CPO price spike in Mar 2016 only benefited FR in April 2016 when goods are delivered.
Expected stronger 2H16
- FR maintained its flat to-5% FFB growth guidance for 2016. The lower yield due to 2015’s drought is mitigated by new areas coming to maturity (+10k ha; +7%) and young mature entering prime maturity.
- Although the weather has normalised at its estates of late, it anticipates much stronger output only in 2H16.
- FR maintains its cash cost per tonne estimate for 2016 at USD220/t. Hence, we expect sequentially stronger quarterly earnings, highly skewed towards 2H16 when output recovers.
TP cut to SGD1.70; HOLD for now
- We cut our 2016/17/18F EPS by -16/-7/-7% as we conservatively lowered our net CPO ASP assumptions by USD20/t to USD540/573/599/t, and we also cut our 2016 FFB nucleus output (-5%) forecast.
- We now expect -1% output growth in 2016 vs +4% previously.
- Pegging to an unchanged 17x 2016 PER (+0.5SD of historical mean for its sector bellwether status amid current El Nino induced CPO price rally), our new TP is SGD1.70 (-18%).
Ong Chee Ting CA
Maybank Kim Eng
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http://www.maybank-ke.com.sg/
2016-05-15
Maybank Kim Eng
SGX Stock
Analyst Report
1.70
Down
2.08
