First Resources 3Q23 Preview - UOB Kay Hian 2023-10-25: Strong Earnings Coming Through

• Upgrade First Resources to BUY with the same target price of S$1.65 given the softer share price performance.
• We recommend investors to BUY with the CPO uptrend in 4Q23-2024 as we expect First Resources’s 3Q23 earnings to come in strongly at US$70m-80m. This is on the back of higher upstream margins, thanks to high production, sales volume and lower fertiliser costs.
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3Q23 results preview.

• We anticipate First Resources (SGX:EB5) will make a substantial earnings contribution in 2H23, accounting for 60% of our full-year forecast for 2023. This projection is based on anticipated improvements in upstream margins and a decrease in fertiliser pricing.
• - Read this at SGinvestors.io -
• The positive outlook is primarily attributed to the following:

Peak production in 3Q23:

• We anticipate that First Resources's peak production will likely occur in 3Q23, contrary to market expectations of 4Q23. Despite the recent dryness and haze in Indonesia, First Resources may experience a smaller impact compared with its peers, as the affected areas are primarily located in South Sumatra, South Kalimantan, and Central Kalimantan whereas First Resources's estates are predominantly situated in Riau (64%), West Kalimantan (25%), and East Kalimantan (11%). With this, we still stick with our FFB production for First Resources at flat y-o-y which is in line with management’s previous guidance of 0-5% y-o-y FFB production growth for 2023.

Lower fertiliser cost:

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Jacquelyn Yow Hui Li UOB Kay Hian Research | Leow Huey Chuen UOB Kay Hian | https://research.uobkayhian.com/ 2023-10-25 SGinvestors.io

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