First Resources - UOB Kay Hian 2022-02-28: 2H21 Results Above Expectations

FIRST RESOURCES LIMITED (SGX:EB5)

First Resources - 2H21 Results Above Expectations

First Resources’s 2021 results came in above our expectations lifted by higher CPO ASP and better-than-expected downstream contribution. We reckon that the impact of DMO would reflect lower net realised CPO ASP but we still expect upstream to continue to perform with current increasing CPO prices.
Downstream margin would remain stable. Revise earnings on the back of higher CPO assumption of RM4,200/tonne and downstream margin.

First Resources (SGX:EB5) reported its 2H21 core net profit at US$119m (+ > 100% q-o-q, > +100% y-o-y), bringing 2021 core net profit to US$149m (+54% y-o-y). The results are above our and consensus expectations on the back higher crude palm oil (CPO) ASP and better-than-expected downstream contribution.
Strong upstream h-o-h and y-o-y in 2H21, mainly lifted by its strong upstream performance from its higher average ASP and better sales volumes. The higher sales volume in 2H21 was also driven by a net inventory drawdown of 50,000 tonnes and higher purchases of third-party CPO.
Downstream operation performed well too. The refining and processing segment had improved by > 100% q-o-q and 96% y-o-y in 2H21 on the back of higher sales volume and the reduction in export levies effective 2 Jul 21 by the Indonesian government.

2021 fresh fruit bunch (FFB) nucleus production was at 2.94m, slightly lower than our full-year estimate of 2.98m, whereby we reckon the variance was mainly due to the high rainfall in Indonesia in 4Q21. Management guided its FFB nucleus production growth guidance at 0-5% y-o-y for 2022, supported by a recovery in production as well as higher yield.
Fertiliser application is behind schedule. Management had mentioned that fertiliser application for 2021 was behind schedule (80% from its initial target), mainly attributed to the wet weather.

First Resources’s upstream would be the one taking cooking oil producers in order to secure an exports licence.

We had revised up our earnings forecast by 24% for 2022, factoring in high CPO of S$0.03/share. First Resources revised its dividend payout to 50% from 30% previously.
See
Catalysts:
- Stronger-than-expected CPO price recovery. First Resources’s earnings are still largely dependent on upstream contributions, and higher CPO prices are positive to its earnings. With every 10% increase in CPO price, First Resources earnings would be boosted by 22%.
- Higher-than-expected FFB and CPO production.

Jacquelyn Yow Hui Li UOB Kay Hian Research | Leow Huey Chuen UOB Kay Hian | https://research.uobkayhian.com/ 2022-02-28

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