First Resources (FR SP) - Maybank Kim Eng 2017-02-28: Exceeded expectations

First Resources (FR SP) - Maybank Kim Eng 2017-02-28: Exceeded expectations FIRST RESOURCES LIMITED EB5.SI

First Resources (FR SP) - Exceeded expectations

4Q beat our and consensus forecasts 

  • Headline and core results exceed expectations for 2016. 
  • For 2017, we expect FFB output recovery to drive +13% EPS growth. However, trading at 16x 2017 PER, the growth prospects have been partly priced in. 
  • Given limited upside to our unchanged TP of SGD1.97 on 17x 2017 PER, its 5- year mean, FR remains a HOLD.

Strong end to 2016 

  • 2016 headline PATMI was a strong USD125m (+31% YoY), partly lifted by USD13m in FV gain on biological assets. Stripping this, 2016 core PATMI was USD115m (+21% YoY), which met 108%/107% of our/consensus estimates. 
  • The positive surprise in 4Q16 came from the upstream division which benefited from high FFB nucleus output (+13% YoY, +27% QoQ) and good CPO ASP of USD629/t (+36% YoY, +3% QoQ).

Low cash cost of production at USD215/t (+5% YoY) 

  • For 2016, FFB output fell 6% YoY but was more than offset by higher CPO ASP (+9% YoY). Nonetheless, as FFB yield fell 12% YoY to 16.8t/ha in 2016, FR’s unit cash cost of production rose 5% YoY to USD215/t. 
  • As for downstream, it suffered negative EBITDA margins of USD2/t (vs positive margin of USD29/t a year ago).

2017’s growth prospects priced in 

  • Following the results, we have tweaked our financial parameters which led to -1%/-1% change in our 2017-18 PATMI forecasts and we also introduce our 2019 forecast. 
  • 2017’s EPS growth of 13% will be mainly driven by our expected +22% YoY rebound growth in FFB output. 
  • We are keeping our 2017 net CPO ASP unchanged at USD558/t (-5% YoY). 
  • Risks to our forecasts include CPO price volatility and weather anomalies impacting output. 
  • A final DPS of 2.375 Singapore cents was proposed, bringing 2016 total DPS to 3.0 cents.

Ong Chee Ting CA Maybank Kim Eng | 2017-02-28
Maybank Kim Eng SGX Stock Analyst Report HOLD Maintain HOLD 1.970 Same 1.970