First Resources - Maybank Kim Eng 2020-11-15: Anticipating An Even Better 4Q20

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

First Resources - Anticipating An Even Better 4Q20


Target price raised to S$1.96; Maintain BUY

  • First Resources (SGX:EB5)’s 3Q20 headline PATMI met our/consensus expectations. With present high CPO price, First Resources’s 4Q will likely surprise on the upside.
  • Following our FY20-21E EPS upgrades, we raise our First Resources's target price to S$1.96 on 17x 2021 PER peg (its updated 5-yr mean; from S$1.79 on 18x 2020 PER) as we roll forward our valuation year.
  • First Resources is our top BUY among the large caps. We like its integrated model, strong management and low production cost.



3Q20 earnings caught up and met expectations

  • First Resources's 3Q20 headline PATMI of USD37m (+33% y-o-y, +76% q-o-q) met 32% of our/ street full-year estimates. This brings 9M20 headline PATMI to USD80m (+41% y-o-y) or 70% of our/street full-year estimates. 3Q20 revenue rose 21% y-o-y to USD166m (+21% q-o-q) driven mainly by higher ASP.
  • First Resources posted a lower y-o-y nucleus FFB output (-7% y-o-y, +25% q-o-q). There was also a net inventory build-up of +5,000t in 3Q20 (9M20: +24,000t; 9M19: -53,000t) which may translate to higher sales in 4Q20.


Expect a strong finish in 4Q20

  • First Resources will likely report stronger q-o-q earnings in 4Q20 following the recent spike in CPO price to > MYR3,000/t which should offset expected weaker q-o-q output. Overall estate cost in 4Q20 should also be lower q-o-q as First Resources has completed ~90% of its full-year fertilising requirement in 9M20 (60- 70% in 1H20).
  • First Resources's 4Q20 earnings may also be lifted by higher downstream margins. Without providing details, First Resources guided that it has also locked in slightly higher-than-usual fwd sales given recent jump in palm oil prices.

Raising First Resources FY20-21E earnings forecast by +12%/+2%






Ong Chee Ting CA Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2020-11-15
SGX Stock Analyst Report BUY MAINTAIN BUY 1.96 UP 1.790



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