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First Resources - Maybank Kim Eng 2021-03-01: FY21 Remains Promising Despite Uncertain Forward Sales Impact

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

First Resources - FY21 Remains Promising Despite Uncertain Forward Sales Impact


New dividend payout ratio of up to 50% from FY21E

  • First Resources (SGX:EB5)'s 2H20 core PATMI missed our / consensus estimates on several factors. But the net inventory build-up at end-2H20 and Fair Value loss on derivative financial instruments (US$11m) will likely benefit FY21E’s bottom line.
  • Recent guidance on forward sales created some uncertainty on its 1H21 downstream outlook. Even assuming zero downstream EBITDA contribution for FY21E, we still forecast a 34% core earnings growth for First Resources in FY21E on higher price and output.
  • Following our earnings forecast revisions, our new target price for First Resources is S$1.88 (-4%) on unchanged 17x 2021 PER peg, its 5-year mean. First Resources remains a BUY.
  • A final dividend of S$0.02 per share was proposed, and a new dividend payout ratio of up to 50% was announced.



Several factors led to weak 2H20 earnings

  • First Resources's 2H20 core PATMI of US$53m (-7% y-o-y, +23% h-o-h), brings 12M20 core PATMI to US$97m (+11% y-o-y) which met just 75%/72% of our/street full-year estimates. 2H20 results were below expectations due to
    1. lower-than-expected CPO ASP achieved due to forward sales done earlier and also the lagged nature of sales recognition of an integrated player,
    2. net inventory build-up (end-2H20: +25,000t) as logistics were affected by heavy rainfall,
    3. fair value loss (US$11m),
    4. FX losses (US$5m), and
    5. high effective tax rate (34%) due to withholding tax and deferred tax adjustments on Indonesia’s lowered corporate tax rates.


All-in cost to customer still low at US$300/t, we estimate.

  • First Resources's FY20 plantation EBITDA rose 33% y-o-y to MYR236m as higher CPO ASP (+16% y-o-y) offset weaker output (-4% y-o-y). We estimate its all-in operating cost to customers was at US$300/t (+4.5% y-o-y). Meanwhile, downstream EBITDA rose 9% y-o-y to US$32m on higher margin of US$29/t.

Expect 34% EPS growth despite downstream hedges






Ong Chee Ting CA Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-03-01
SGX Stock Analyst Report BUY MAINTAIN BUY 1.88 DOWN 1.960



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