First Resources - CGS-CIMB Research 2022-08-15: Upgrade To ADD For Its Dividend Appeal

First Resources - Upgrade To ADD For Its Dividend Appeal

  • First Resources (SGX:EB5) posted a 738% y-o-y jump in 1H22 net profit to US$134m, thanks to higher crude palm oil (CPO) price achieved and downstream margins, which more than offset the impact from the export ban. We consider the 1H22 net profit to be above our expectation, driven mainly by better-than-expected downstream processing margin of US$58/tonne in 1H22 and higher-than-expected average palm kernels (PK) prices achieved (+63% to US$803/tonne).
  • An interim dividend of S$0.025 per share was declared, representing a dividend payout of 21% of underlying profit and interim dividend yield of 1.7%, within expectations.
  • We project First Resources to post flattish h-o-h earnings in 2H22F as we expect higher sales volumes (from build-up in stocks due to export ban) and FFB output to offset lower CPO prices and higher operating costs.
  • First Resources said it expects palm oil inventory in Indonesia to normalise by Sep as demand for palm oil is healthy and as the palm oil export policy has been relaxed. However, this will likely be offset by lower current CPO and PK prices. Indonesia CPO price was US$746/tonne as at 11 Aug vs US$1,025/tonne in 1H22.
  • We raise our FY22-24F net profit forecasts for First Resources by 0.2-13.1% to reflect lower export tax and levy (following recent revisions), better downstream margin and lower effective tax rate. We expect First Resources to post an 85% jump in its FY22F net profit, driven mainly by higher CPO price achievement.
  • We cut our target price for First Resources by 16% to S$1.76, now based on 2023F P/E of 11.6x (-1 standard deviation from historical 10-year average P/E) vs 16x P/E previously to reflect First Resources’s earnings and CPO price likely peaking in FY22.
  • As First Resources's Share Price has declined 27% since our last update on 16 May, First Resources’s P/E valuations and dividend yields are attractive at 6.5x FY22 P/E and 7.7%. We upgrade our recommendation on First Resources to ADD and see share price support from its EV/ha of US$10,087.

Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @

Ivy NG Lee Fang CFA CGS-CIMB Research | Nagulan RAVI CGS-CIMB Research | 2022-08-15
SGX Stock Analyst Report ADD UPGRADE HOLD 1.76 DOWN 2.120

Previous report by CGS-CIMB:
2022-02-28 First Resources - Highest Final Dividend Since Listing

Target prices by 2 other brokers at First Resources Target Prices.
Listing of broker reports at First Resources Analyst Report.

Relevant links:
First Resources Share Price History,
First Resources Announcements,
First Resources Dividends & Corp Actions,
First Resources News Articles


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