First Resources - Maybank Kim Eng 2021-05-17: Expect Stronger Earnings Deliveries In 2H21

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FIRST RESOURCES LIMITED (SGX:EB5)

First Resources - Expect Stronger Earnings Deliveries In 2H21

1Q21 hurt by forward sales commitments

• First Resources (SGX:EB5)'s 1Q21 PATMI missed our / consensus expectations largely on higher export duties payable on its forward sales. We expect better quarterly earnings ahead, especially in 2H21 where output is seasonally stronger. We make no changes to our earnings forecasts.
• First Resources remains a BUY with unchanged target price of S$1.88 on 17x 2021 PER peg, its 5-yr mean.
• We like First Resources for being a low cost producer with attractive dividend yields of around 4%.

A slow start to FY21E

• First Resources provided an executive summary of key financial and operational information on its 1Q21 performance. Its 1Q21 headline PATMI of US$8.8m (-61% y-o-y) met just 7%/6% of our/consensus full year estimates. Despite having achieved higher revenue of US$197m (+40% y-o-y), its EBITDA came in lower at US$41.5m (-23% y-o-y) due to the impact of higher export taxes from the new export levy structure (since Dec 2020) and forward sales locked-in earlier at lower prices.
• While First Resources sold forward a meaningful percentage of its 1H21 output (without providing specifics) when CPO price was uptrending towards late 2020, the export tax (determined by the government on a monthly basis) was however unhedged.
• Given 1Q21’s high export taxes, First Resources had to pay the difference between the export taxes (in the month of delivery) compared to when it was locked in, and this ate into its EBITDA margin. We understand First Resources has completed ~20% of its 2021’s fertilizing programme in 1Q21, although slightly behind schedule due to the wet weather.

Promising start to 1Q21 nucleus output

• Positively, First Resources recorded a 1Q21 nucleus output growth of 11% y-o-y to 700,037t. First Resources is keeping its up to 5% y-o-y growth rate for now (MKE’s full year estimate: +5% y-o-y).

2H21 EPS to play significant catch up

• We expect 2Q21 First Resources's earnings per share growth to remain muted due to remnants of earlier forward sales but 2H21 EPS should play significant catch up from the remaining unhedged output volumes. 2H is also seasonally stronger in terms of output volumes.
• See
  • First Resources's Share Price,
  • First Resources's Target Price,
  • First Resources's Analyst Reports,
  • First Resources's Dividend History,
  • First Resources's Announcements,
  • First Resources's Latest News.

Ong Chee Ting CA Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-05-17

SGX Stock Analyst Report BUY MAINTAIN BUY 1.880 SAME 1.880