STI : 3,180.25
(Downgraded from BUY)
Price Target : 12-month S$ 2.19
• 3Q13 earnings of US$51.4m exceeded expectations
• FFB output peaked during the quarter, jumping 38% q-o-q
• Expect sequentially lower 4Q13 earnings on lower volumes
• Rating cut to HOLD; recent outperformance has priced in the strong earnings recovery, TP unchanged at S$2.19
3Q13 earnings above. First Resources (FR) reported 3Q13 net profit of US$51.4m (-20% y-o-y; +36% q-o-q) – above our expected range of US$38-40m. This brought 9M13 earnings to US$152.7m, representing 76% of our full year forecast. The better-than-expected performance was due to a 22% q-o-q jump in plantations revenue and 17% q-o-q rise in refining and processing revenues. Likewise, plantations EBITDA jumped 58% q-o-q (+9% y-o-y), while refining and processing EBITDA increased 47% q-o-q (-81% y-o-y). These were consistent with 30% and 27% sequential jumps in CPO and refined products volume, respectively, while realised ASP had sequentially declined by 7% and 8%.
Normalised 4Q13 outlook. FR produced 615k MT of own FFB (+8% y-o-y; +37% q-o-q) and 174k MT of CPO in 3Q13 (+12% y-o-y; +37% q-o-q). FFB yields improved to 5.9 MT/ha for the quarter (from 4.3 MT/ha in 3Q12), while OER was 23.2% (improving from 23.0% in 3Q12) despite higher smallholders FFB. The group maintains its output growth guidance of 0-5%. Hence, based on our unchanged forecast FFB output of 2.0m MT (+5% y-o-y), we expect 4Q13 FFB output to sequentially drop by 9%.
Earnings, TP unchanged. Based on our forecast, 4Q13 earnings should ease 7% q-o-q to US$47.9m. We have also maintained full year expansion target of 14k ha for the year, but we have not yet imputed any rubber plantings in our model.
Rating cut to HOLD. After recent outperformance, we believe FR is fairly priced. On the prospects of sequentially lower earnings, we recommend investors to take profit. The counter currently offers a dividend yield of c.2%.
Publish date: 14/11/13