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

FIRST RESOURCES LIMITED (SGX:EB5)

First Resources - Anticipating An Even Better 4Q20

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.

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.

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.

We recently raised our 2020/2021 industry-wide CPO ASP forecasts to MYR2,660/t (from 2,400) and MYR2,500/t (from 2,400) respectively. As First Resources is now guiding for a slightly lower y-o-y output for FY20 (previously flat y-o-y; 9M20: -3.5% y-o-y), we cut our 2020/21/22 FFB output forecasts by - 4%/-4%/-4%; implying –3%/+9%/+6% y-o-y growth. With that, our FY20E/21E/22E earnings forecast for First Resources are revised by +12%/+2%/-7% respectively.
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 | https://www.maybank-ke.com.sg/ 2020-11-15

SGX Stock Analyst Report BUY MAINTAIN BUY 1.96 UP 1.790