Comprehensive Analysis of First Resources and Its Market Position
Introduction to First Resources Ltd
First Resources Ltd (FR SP), a prominent player in the cultivation of oil palms in Indonesia, also operates palm oil refinery and biodiesel processing facilities. Maybank Research Pte Ltd has reviewed the company’s 9M24 results, which exceeded both their expectations and those of the broader market. Despite the challenges, First Resources has managed to maintain a stronghold in the plantation sector, showing resilience and strategic agility.
9M24 Results: Performance Exceeding Expectations
First Resources has reported a core PATMI of USD 152 million for 9M24, marking a 28% year-on-year increase. The third quarter alone saw a core PATMI of USD 61 million, a 19% increase from the previous year and a 12% increase quarter-on-quarter. This impressive performance was driven by a 2% increase in revenue, attributed to better FFB nucleus output and improved processing margins. The company’s strategic acceleration of fertilizer application in the third quarter has also contributed to these results.
Refining Margins and Market Strategy
The downstream division of First Resources has shown a positive trend in refining margins, with improvements noted quarter-on-quarter. Looking forward to the fourth quarter of 2024, the refining margins are expected to continue this upward trajectory, buoyed by rising prices. The company has largely adopted a spot selling strategy for 2024 and is carefully evaluating market conditions for 2025 before making further commitments.
Financial Forecasts and Revisions
Maybank Research has raised its EPS forecasts for FY24E-26E by 18%-25%, reflecting enhanced downstream earnings and an optimistic market outlook. The unit cash cost guidance remains unchanged at USD 280-300 per tonne, indicating stable operational efficiency. The revisions also account for industry-wide adjustments to CPO ASP, with projected prices set at MYR 4,200 per tonne for 2024E and MYR 4,000 per tonne for 2025E-26E.
Risk Factors and Market Dynamics
First Resources faces several risk factors that could impact its earnings estimates and market position. These include weather anomalies affecting output growth, fluctuating CPO prices, and potential negative government policies. Additionally, there is ongoing scrutiny from the RSPO concerning deforestation allegations, which could affect the company’s reputation and operational licenses if resolved unfavorably.
Financial Metrics and Shareholder Insights
First Resources has demonstrated robust financial health, with a significant market capitalization of SGD 2.5 billion. The company’s stock performance has shown resilience, with a 52-week high/low of SGD 1.60/1.32. The dividend yield is projected to stabilize around 5.9% in 2024, reflecting the company’s commitment to returning value to shareholders. The company maintains a strong balance sheet, with total assets projected to grow to USD 2.17 billion by FY26E.
Conclusion and Strategic Recommendations
Maybank Research maintains a HOLD recommendation for First Resources, with a revised price target of SGD 1.60, reflecting a 6% upside potential. This cautious stance considers the uncertainties surrounding the RSPO investigation and market volatility. Investors are advised to monitor the company’s strategic moves and market developments closely. Despite these challenges, First Resources remains a key player in the plantation sector, backed by a solid operational framework and growth prospects.
