First Resources - Maybank Kim Eng 2021-11-16: 3Q21 Core PATMI Caught Up

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FIRST RESOURCES LIMITED (SGX:EB5)

First Resources - 3Q21 Core PATMI Caught Up

Limited upside for now; HOLD for its dividend

• First Resources (SGX:EB5)'s 3Q21 core PATMI caught up and met ours but slightly below consensus expectations. With still elevated CPO ASP, First Resources’s 4Q21 EPS will likely be flat-to-higher q-o-q.
• We lower our target price for First Resources to S$1.68 on lower 13x FY22 PER pegged at -1 standard deviation of its updated 5-year mean (previously 14x FY22 PER at -1 standard deviation of 5-year mean).
• Given limited upside, First Resources remains a HOLD. We prefer Bumitama Agri (SGX:P8Z) (Buy, Target price: S$0.93).

It is unclear what CPO ASP was achieved in 3Q21

• First Resources's 3Q21 core PATMI of US$53m (+42% y-o-y, +147% q-o-q) met 38%/36% of our/ street full-year estimates. This brings 9M21 core PATMI to US$83m (+5% y-o-y) or 60%/56% of our/street full-year estimates.
• 3Q21 revenue rose 89% y-o-y to US$314m (+45% q-o-q) driven by higher ASP (but it is unclear what ASP was achieved in 3Q21 due to limited disclosure) and higher sales volume due to a net inventory drawdown of 48,000 tonnes.
• First Resources posted lower y-o-y nucleus FFB output (-4% y-o-y, +11% q-o-q). It is keeping its 0-5% y-o-y FFB growth guidance for 2021 (9M21: +4% y-o-y).

Expect 4Q results to be flat-to-higher q-o-q

• First Resources will likely report flattish to stronger q-o-q earnings in 4Q21 following the elevated CPO (and PK) prices which should more than offset weaker q-o-q output. Although First Resources has only completed two-third of its full-year fertilising requirement in 9M21 (1H21: ~50%), it may not complete its 2021’s plan due to heavy rainfall thus far.
• 4Q21 downstream margins are likely to be lower q-o-q as most of the inventory build-up in 1H21 has been delivered in 3Q21. Without providing details, First Resources guides that it has continued to engage in forward sales. Overall, the percentage of forward sales were heavier in 1H21 compared to 2H21.

Tweaked our FY21E-23E EPS forecasts

• Following our industry-wide CPO ASP revisions to MYR4,300/t (from MYR3,500/t) for 2021, MYR3,200/t (from MYR2,800/t) for 2022, and MYR3,000/t (from MYR2,800/t) for 2023 respectively, our FY21E/22E/23E earnings per share forecasts for First Resources are tweaked by 1%/0%/0% respectively after adjusting for our estimated forward sales in FY21 (ie below spot prices), lowering our absolute FFB nucleus output assumptions (-5%/-5%/-5% respectively), and higher cost assumptions (especially fertiliser) in FY22.
• 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 Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-11-16

SGX Stock Analyst Report HOLD DOWNGRADE BUY 1.68 DOWN 1.810