First Resources Ltd: FY24 Results Analysis and Future Outlook

Broker: UOB Kay Hian

Date: 04 March 2025

Company Overview

First Resources Ltd operates within the Consumer Staples sector, primarily engaging in plantation, palm oil milling, refining, fractionation, biodiesel production, and kernel crushing. With shares issued totaling 1,549.3 million and a market capitalization of S\$2.261 billion, First Resources is a significant player in the palm oil industry.

Share Performance and Target Price

Currently, First Resources shares are priced at S\$1.59, with a target price raised to S\$1.75, indicating an upside potential of 10.1%. The previous target price was S\$1.65.

Financial Performance Highlights

First Resources reported a robust FY24 core net profit of US\$229 million, showcasing a remarkable 56% year-on-year growth. This figure not only met internal expectations but also surpassed analyst forecasts, achieving 104% and 113% of respective full-year projections. The company’s fourth quarter results showed a quarter-on-quarter earnings increase of 33% driven by higher average selling prices (ASPs) and continual production growth.

Quarterly and Annual Results

Operational Insights

The increase in profitability was attributed to higher upstream ASPs and enhanced processing margins. The EBITDA from the plantations segment rose by 21% year-on-year to US\$393 million, supported by a Crude Palm Oil (CPO) ASP of US\$1,006 per tonne compared to US\$900 per tonne in 2023. The downstream segment also made significant progress, posting EBITDA of US\$18.4 million, contrasting with the previous year’s loss.

Production Growth and Cost Efficiency

First Resources demonstrated commendable growth in Fresh Fruit Bunches (FFB) production, with an increase of 5.9% year-on-year, surpassing management’s target of 0-5%. This growth is particularly noteworthy as the Indonesian palm oil production sector faced declines. The company’s average cash cost for CPO improved to US\$310 per tonne from US\$327 per tonne in 2023, driven by higher production levels.

Dividends and Shareholder Returns

In alignment with its profitability, First Resources declared a full-year dividend per share of S\$0.098, up from S\$0.062 in 2023, reflecting a 50% payout of the underlying net profit.

Future Guidance and Expectations

Management has set a production growth target of 5% for 2025, following a successful operational year in 2024. It is noteworthy that the average age of the trees in their estates is 14.2 years. Cash cost guidance for 2025 remains at US\$280-300 per tonne, similar to the 2024 projection, with expectations for improved FFB yields contributing to cost efficiency.

Downstream Operations and Biodiesel Contribution

Management anticipates stronger contributions from its downstream operations, particularly from the biodiesel sector, as refinery capacity is set to nearly double to 1.3 million tonnes per annum by the end of 2024. Furthermore, the company has been allocated a higher biodiesel blending amount of approximately 1 million tonnes for 2025 under Indonesia’s B40 programme.

Earnings Revision and Valuation

After revising earnings forecasts, the 2025 EPS has been increased by 21%. This revision is based on higher CPO price assumptions and improved downstream profitability, while FFB growth assumptions were slightly lowered to 4% year-on-year, anticipating a natural rest period following 2024’s strong performance.

Recommendation

UOB Kay Hian maintains a “BUY” recommendation on First Resources Ltd, with an increased target price of S\$1.75. This adjustment reflects the updated earnings forecasts and the continued positive outlook for the palm oil industry.

Potential Catalysts for Share Price Upside

• Stronger-than-expected recovery in CPO prices.
• Higher-than-expected FFB and CPO production levels.
• Improved downstream contributions from expanded production capacity.

Production Metrics

Conclusion

First Resources Ltd stands poised for continued growth in the palm oil sector, backed by strong operational performance, improved profitability, and strategic expansions in downstream capacity. With a solid recommendation from UOB Kay Hian, the market can expect this company to navigate its future challenges effectively while delivering value to its shareholders.