First Resources - Maybank Research 2022-08-14: 1H22 Results No Surprises


First Resources - 1H22 Results No Surprises

  • First Resources (SGX:EB5)'s strong 1H22 core PATMI met ours but slightly below consensus expectations. We expect 2H22 core PATMI to be weaker h-o-h on lower CPO ASP and higher costs, but mitigated by carried forward stocks of > 1.5 months at end-June.

First Resources' 1H22 results suppressed by export ban and restrictions

  • Adjusted for US$12m in fair value loss on biological assets, First Resources’s 1H22 core PATMI of US$138m (+356% y-o-y) met 59%/51% of our/consensus full-year estimates. 1H core results would have been even better if not for Indonesia’s export ban and restrictions in 2Q that led to an inventory build-up of ~131,000t for 1H22 (1H21: +20,000t).
  • 1H22 CPO ASP achieved was estimated at US$837/t (+82% y-o-y), which was below market’s spot price of ~US$1,008/t. We believe the difference was partly due to the forward sales locked-in earlier.
  • Still, the higher y-o-y CPO ASP achieved in 1H22 more than made up for the lower sales volume (-25% y-o-y) as 1H plantation EBITDA jumped 136% y-o-y to US$198m.
  • Meanwhile, its downstream EBITDA jumped 125% to US$58m due to favourable EBITDA margins of US$127/t (1H21: US$48/t). First Resources benefitted from the wide differential exports taxes between CPO and PPO in 1H22, which is unlikely to be repeated in 2H.

2H22 nucleus output to be stronger h-o-h

  • In terms of production, 1H22 FFB nucleus output of 1.39mt (-2% y-o-y) met 46% of our full-year forecast.
  • First Resources maintains its 0-5% y-o-y FFB growth forecast for FY22E (MIBG: +3% y-o-y) as it expects 2H22 output to be stronger h-o-h with 3Q22 likely to be its peak quarter.

Fertiliser application behind schedule in 1H22

BUY First Resources for its single-digit P/E and attractive dividend yields.

  • We make no changes to our earnings forecasts for First Resources. Given 12% total return upside, we upgrade First Resources to BUY (from HOLD) with unchanged target price of S$1.62 on 10x FY23E PER at -1.5 standard deviation of its 5-year mean.
  • First Resources's 1st interim dividend of S$0.025 (1H21: S$0.0125) will go ex-date on 31 Aug.

Ong Chee Ting CA Maybank Research | https://www.maybank-ke.com.sg/ 2022-08-14
SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.620 SAME 1.620