First Resources - CGS-CIMB Research 2022-11-15: Stock Drawdown To Boost 4QFY22 Earnings

First Resources - Stock Drawdown To Boost 4QFY22 Earnings

  • First Resources (SGX:EB5) posted a 206% y-o-y jump in 9M22 net profit to US$254m. We consider the 9M22 net profit to be above our expectation, at 96% of our full-year forecast and 100% of Bloomberg consensus’ full year forecasts.
  • The better 3Q results are due to
    1. higher-than-expected CPO price,
    2. higher CPO sales volume,
    3. lower costs of production, and
    4. lower effective tax rate.
  • First Resources said it recorded higher ASP y-o-y in 3Q22. This is a better achievement compared to Indonesia’s average CPO price trend which fell 10% y-o-y to Rp11,386/kg for the same period. We estimate reported core net profit grew by 82% q-o-q to US$116.3m in 3Q22 driven by higher palm oil sales volumes and prices.
  • Other notable takeaways are its 3Q22/9M22 FFB output from nucleus estates grew 11.8%/2.9% y-o-y.
  • First Resources lowered its cost of production guidance to US$250- 270/tonne (from US$270-290/tonne previously) in 2022F as its fertiliser application trailed its target annual budget.

What to expect in 4Q22F?

  • We expect First Resources to deliver another strong performance in 4Q22F as it has sold forward some of its 4Q22F sales volumes at favourable CPO prices and will continue to benefit from the export levy waiver till mid-Nov 22. On top of that, CPO prices have been trending higher in 4Q22 vs 3Q22 due to its large discount against soybean oil.
  • Although 4Q22 FFB output is likely lower vs 3Q22, this will be partly compensated by the drawdown of net inventory build up from 1 Jan to 30 Sep 2022 of 117,000 tonnes.
  • We raise our FY22F net profit forecast for First Resources by 37% to reflect a US$100/tonne rise in CPO price assumptions to US$880/tonne, lower costs of production assumption by US$20/tonne and lower effective tax rate for FY22 to 20%.
  • Reiterate ADD recommendation on First Resources with a higher target price of S$1.86, based on FY23F P/E of 11.6x (-1 standard deviation from historical 10-year average P/E). We continue to favour First Resources for its attractive P/E valuation at 5.4 x FY22 P/E and 9.2% dividend yield. See First Resources's dividend history.

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 | 2022-11-15
SGX Stock Analyst Report ADD MAINTAIN ADD 1.86 UP 1.760

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

Check out the most recent target prices at First Resources Target Prices. Listing of analyst research reports at First Resources Analyst Report.

Relevant links:
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First Resources Announcements,
First Resources Dividends & Corp Actions,
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