First Resources - RHB Invest 2023-05-15: Lower ASPs Dampen 1Q23 Numbers; Downgrade To SELL

• Downgrade First Resources to SELL from Neutral, target price drops to S$1.20 from S$1.60, 13% downside.
• First Resources’s 1Q23 results disappointed. Net profit plunged 74% y-o-y to US$19.3m. This came in well below expectations, making up 8-9% of our and Street FY23F earnings, largely due to lower ASPs achieved as well as a lower FFB output.
• - Read this at SGinvestors.io -

Briefing highlights:

• 1Q23 nucleus FFB production dropped by 3.3% y-o-y, i.e. vs our +2.2% projection and management’s 0-5% guidance for FY23. First Resources is maintaining its growth guidance, and expects production to pick up in 2H22 with the 1H:2H output ratio at 45:55. Wet trim our FY23F FFB growth to 1.2% y-o-y while keeping FY24-25F growth at 2-4% y-o-y.
• - Read this at SGinvestors.io -
• Fertiliser application slow in 1Q23. First Resources does not guide on quarterly unit costs, but believes unit costs are still on track to hit US$280- 300/tonne (+2-9% y-o-y) in 2023F. We understand fertiliser application was still slow in 1Q23 due to wet weather, but it expects to be able to catch up in the coming months. For 2023F, fertiliser costs are estimated to be 25% lower y-o-y.
• Downstream margins returned to “healthy” levels in 1Q23, which we presume means back to positive territory (from negative in 2H22), likely due to the full-quarter impact of the end of the tax holiday in mid-Nov 2022. This should remain so for the next few quarters, given Indonesia’s competitive edge over Malaysia now for downstream products. To be conservative, we cut downstream margins for FY23- 25F to reflect a more gradual recovery.

First Resources – Earnings forecast and target price

• Read more at SGinvestors.io.

Singapore Research RHB Securities Research | https://www.rhbgroup.com/ 2023-05-15 SGinvestors.io

---