First Resources - Maybank Kim Eng 2019-05-15: Slow Start Indeed To The Year

FIRST RESOURCES LIMITED (SGX:EB5) | SGinvestors.io FIRST RESOURCES LIMITED (SGX:EB5)

First Resources - Slow Start Indeed To The Year

Expect better output in 2H19

  • FIRST RESOURCES LIMITED (SGX:EB5)'s 1Q19 results fell short of our/market expectations mainly on low prices and output. With 2-3 months of inventory at hand, earnings could still play catch up especially in 2H19 when output and prices recover.
  • Nonetheless, we lowered our EPS forecasts on weaker FFB growth guidance. With that, we trimmed our Target Price to SGD1.93 (previously SGD2.03) on unchanged 17x PER peg, its 5-year mean.
  • Still, we reiterate our BUY call on First Resources given its medium-term growth prospect, and cost efficiency.



Dragged by lower CPO price and output

  • First Resources reported a 1Q19 core PATMI of USD12m (-56% y-o-y, -38% q-o-q) which met just 9%/8% of our/market FY19 estimates.
  • The earnings shortfall was due to softer upstream earnings on weak 1Q19 CPO ASP achieved of USD460/t (-22% y-o-y, -7% q-o-q) and low FFB nucleus output (-7% y-o-y, -16% q-o-q), and to a lesser extent, delay in invoicing on freight charges to Pertamina for the supply of biodiesel. This was somewhat buffered by net inventory drawdown of ~17,000t during the quarter (2018’s net inventory build-up: ~69,000t).
  • Downstream’s EBITDA margin broke even in 1Q19 compared to 1Q18’s LBITDA margin of –USD4/t and 4Q18’s EBITDA margin of USD26/t.


Crop trend to be substantially stronger in 2H

  • Operationally, First Resources’ 1Q19 FFB output met just 20% of our earlier full-year forecast, but within historical trends as Q1 output is seasonally the weakest. While 2018’s 1H:2H output ratio was 46:54, First Resources guides for 2019’s ratio at 40:60 (vs 2011-18 historical trends of 43:57).
  • Still, First Resources lowered its 2019’s FFB growth guidance to ~5%, at the lower end of its previous guidance of 5-10% (FY18A: +14% y-o-y).


FY19-20E EPS cut by 6%/8%

  • We expect better results in 2H19. But following fresh guidance, we shaved our 2019-10 FFB output estimates by 3%/4%, which implies +6% y-o-y (previously +9%) FFB growth for 2019.
  • Our FY19-20E EPS are cut by 6%/8%.
  • Our FY19 net CPO ASP assumption is presently at USD553/t.





Ong Chee Ting CA Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2019-05-15
SGX Stock Analyst Report BUY MAINTAIN BUY 1.93 DOWN 2.030



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