FIRST RESOURCES LIMITED (SGX:EB5)
First Resources - No Surprises To 1H20 Results
Expect stronger 2H20 profits
- First Resources (SGX:EB5)'s 1H20 PATMI of USD43m (+48% y-o-y) met 37% of our/consensus full-year forecasts, within expectations. Had it not been for a net inventory build-up of ~19,000t in 1H20 (1H19: net inventory drawdown of 31,000t), its 1H PATMI would have been even higher.
- We anticipate a stronger pick up in 2H earnings on seasonally higher output and lower fertiliser costs. Following our EPS revisions, First Resources remains a BUY with a new Target Price of SGD1.79 (previously SGD1.85) on unchanged 18x 2020 PER peg, its 5-yr mean.
- At ~14x 2020 PER now, First Resources trades at -2SD of its 5-yr mean. FR declared an interim DPS of 1 cents (payable: 10 Sept).
1H PATMI lifted by higher CPO ASP, better downstream contribution
- Despite lower revenue (-5% y-o-y) and having completed 60-70% of its full-year fertilisation target in 1H, First Resources posted stronger y-o-y 1H PATMI on higher CPO ASP (USD551/t; +16% y-o-y) and higher downstream contribution.
- Downstream division recorded higher y-o-y EBITDA margin of USD21/t (1H19: USD5/t) due to re-imposition of export levies in 2020.
- Meanwhile, FFB nucleus output was slightly lower at 1.29mt (-1% y-o-y).
Lowering expectations on FFB output
- 1H20 FFB nucleus output met just 41% of our initial full-year forecast, below the historical 1H:2H 43:57 output trend. Even as FR guides for a stronger h-o-h output in 2H20 (especially in 4Q20), it has nonetheless lowered 2020’s nucleus FFB growth guidance to flat y-o-y (previously: 0-5% y-o-y). As such, we cut our 2020 FFB output by 5% to align our expectations with First Resources.
- We have also trimmed our 2021-22 FFB output by 3%/2%, which now implies a 9%/6% y-o-y FFB growth for FY21-22E.
EPS revised down mainly on lower output
- We trimmed our First Resources's FY20E EPS by 2% but cut FY21-22E EPS by 6%/5% as we lower our output assumptions but raised our FY20 CPO ASP to MYR2,400/t (from 2,300/t) following our industry-wide revision.
- For FY20, we have also raised our downstream EBITDA contribution to USD23m (+USD5m).
- See First Resources Share Price; First Resources Target Price; First Resources Analyst Reports; First Resources Dividend History; First Resources Announcements; First Resources Latest News.
Ong Chee Ting CA
Maybank Kim Eng Research
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https://www.maybank-ke.com.sg/
2020-08-16
SGX Stock
Analyst Report
1.79
DOWN
1.850
