First Resources - UOB Kay Hian 2022-11-15: 3Q22 Results Beat Expectations

• First Resources’s 3Q22 results beat expectations on strong ASPs, lower costs and lower effective tax rates. Downstream margins may not have been as strong as we expected but would remain healthy supported by lower feedstock prices.
• - Read this at SGinvestors.io -
• Downgrade to HOLD with a higher target price of S$1.85. First Resources's Share Price went up by 16% since our last upgrade, and we reckon the good results have been priced in.

First Resources's 3Q22 results above expectations.

• - Read this at SGinvestors.io -
• The main variances from 3Q22 strong results vs our expectations are:
  1. Higher ASP. First Resources benefitted from earlier sales commitment with higher ASP vs current price. On top of that, management expects satisfactory ASP for 4Q22 as well which would bring positive impact in 4Q22.
  2. Lower cash cost as fertiliser application was behind the schedule and the full application for 2022 will not be able to meet the target (1H22 only 35% applied vs 1H21 at 50%).
  3. Lower effective tax rate in 3Q22 because of higher profit booked from Singapore.
  4. Healthy refining margin but lower than our expectation. To our surprise, downstream margin was not as strong as our expectation. Management mentioned that refining margin in 3Q22 was lower compared with 1H22 due to the narrower duty and levy advantages.

Strong exports and sales volume in 3Q22.

• Read more at SGinvestors.io.

Leow Huey Chuen UOB Kay Hian Research | Jacquelyn Yow Hui Li UOB Kay Hian | https://research.uobkayhian.com/ 2022-11-15 SGinvestors.io

---