Title: Comprehensive Analysis of First Resources and Other Listed Companies in the Region
Maybank Research Pte Ltd March 19, 2025
First Resources: Long-term Positive Despite Short-term EPS Dilution
Scarcity of Land Justifies the Purchase
According to the report, the proposed acquisition of a 91.2% stake in PT Austindo Nusantara Jaya (ANJT) for USD329.8 million is valued at an EV/planted hectare of USD10,202, which is considered a decent price given the scarcity of land. Although the acquisition is expected to be short-term EPS dilutive for First Resources (FR) at 37.5x 2024 PER, the analysts are long-term positive on ANJT’s potential and the feedstock security it offers to FR’s downstream operations. The analysts have kept their earnings forecasts for now but have downgraded FR to HOLD due to limited upside to their unchanged target price of SGD1.69 on 9x FY25 PER (-0.75SD of 6Y mean).
Spending USD329.8m for a 91.2% Stake in ANJT IJ
FR, through its majority-owned subsidiary PT Ciliandra Perkasa, has entered into a conditional shares purchase agreement with several sellers to buy 3.06 billion shares or 91.17% of ANJT for USD329.8 million in cash. Upon completion of the deal, expected by May 2025, FR will be obliged to conduct a mandatory tender offer for the rest of ANJT’s shares, which could cost an additional USD361.7 million for a 100% takeover.
Decent Purchase Price of USD10,202/ha
According to the report, ANJT’s stake was last put up for sale in mid-2024, where several parties bid for the stakes. ANJT’s key attractiveness lies in its 100% RSPO certification and its ranking of #5 in the SPOTT (Sustainability Policy Transparency Toolkit) latest ranking. For FR, the acquisition presents an opportunity to expand its upstream footprint by around 27% or 48,353 hectares of nucleus area, on top of its existing 178,854 hectares, and to increase its CPO output by around 25% to 1.25 million tonnes, enhancing the feedstock availability for its 1.35 million tonne expanded refining and processing capacity by the end of 2025.
Short-term Pain for Long-term Gain
The report suggests that the acquisition, if funded by borrowings, would increase FR’s proforma net gearing from 8% (for FY24) to 32%, which is still a manageable level. However, the acquisition is expected to be short-term EPS dilutive, with FR’s 2024 proforma NTA and EPS potentially diluted by 1% and 8%, respectively (assuming FR buys 100% of ANJT on January 1, 2024). The analysts believe the EPS dilution will be much smaller in the coming years (if any) as FR further improves the profitability of its oil palm segment and concurrently reduces the losses of its non-core businesses.
Other Listed Companies in the Region
PT Austindo Nusantara Jaya (ANJT IJ)
ANJT is principally engaged in the production and sale of palm oil and other sustainable food crops, as well as renewable energy. As of December 31, 2024, ANJT had a total landbank of 154,650 hectares across Indonesia, of which 53,358 hectares were planted (nucleus: 48,353 hectares; plasma: 5,005 hectares). In 2024, ANJT’s FFB output declined 12% year-over-year to 777,615 tonnes due to severe challenges, primarily caused by adverse weather conditions that impacted operations in the North Sumatra and Southwest Papua plantations. The analysts note that the El Niño event in 2023 also affected production in the Belitung Island, West Kalimantan, and South Sumatra plantations.
Maybank Securities (Thailand) Public Company Limited (MST)
MST accepts no liability whatsoever for the actions of third parties in the distribution of research reports. The analysts note that if the recipient of the report is not an accredited investor, expert investor, or institutional investor, MST shall be legally liable for the contents of the report.
Maybank IBG Research
The report mentions several risk factors to the earnings estimate, price target, and rating for First Resources, including weather anomalies, lower-than-expected CPO prices, negative policies imposed by import countries, unfriendly policies from the Indonesian government, sharply lower crude oil prices, weaker competing oil prices, and potential RSPO membership suspension due to deforestation claims.
