MAYBANK and RHB on Monday (Mar 3) upgraded palm oil player First Resources (FR) to “buy”, on the back of stronger-than-expected profits logged for FY2024 ended December.
Analysts also pointed to an optimistic outlook for FR in FY2025, driven by increased production, lower costs, and improved downstream performance.
Maybank upgraded the counter to “buy” from “hold”, and raised its target price to S$1.69 from S$1.60 previously.
Similarly, RHB upgraded FR to “buy” from “neutral”, and raised its target price to S$1.85, from S$1.65 previously.
As at 4 pm on Monday, shares of First Resources were up 8.9 per cent or S$0.13 at S$1.59.
Maybank analyst Ong Chee Ting noted that FR’s profits after tax and minority interests beat street estimates, due to higher average selling prices and lower production costs.
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On Feb 28, FR posted earnings of US$258.1 million for the full-year ended Dec 31, 2024, up 69.1 per cent from US$145.4 million the year before.
Ong added: “Had it not been a net inventory build-up of 78,000 tonnes, (stemming from lower sales due to deferred delivery), earnings would have been even better.”
He noted that FR’s plantation segment saw earnings before interest, taxes, depreciation, and amortisation (Ebitda) of US$243.1 million for the second half-year, marking a 41 per cent year-on-year increase. This was driven by higher crude palm oil (CPO) prices and an increase in fresh fruit branch output.
Meanwhile, its downstream segment made a turnaround, achieving a positive Ebitda of US$9.8 million in H2 FY2024 with a 2 per cent margin – compared with an Ebitda loss of US$16.6 million the previous year.
Following FY2024’s good performance, Maybank has raised FR’s earnings forecasts for FY2025 by 4 per cent and for FY2026 by 3 per cent.
RHB was more bullish. Following FR’s FY2024 earnings briefing, the brokerage increased its earnings forecasts for FY2025 and FY2026 by 14.7 per cent and 7 per cent, respectively, “after imputing lower unit costs and higher downstream utilisation”.
RHB’s Singapore research team noted that the counter is trading at an attractive 7.2 times price-to-earnings ratio based on its FY2025 forecast – at the lower end of its peer range of seven to 11 times.
For FY2024, FR’s total revenue grew by 5.9 per cent to US$1 billion, boosted by stronger market prices, with CPO prices rising 11.8 per cent to US$1,006 per tonne from US$900 per tonne in FY2023.
Supported by the higher sales, Ebitda surged 41.4 per cent to US$398.9 million, while underlying net profit expanded 56.1 per cent to US$228.8 million.
“Looking ahead, Indonesia’s expansion of its biodiesel mandate from B35 to B40 in 2025 is expected to tighten global palm oil supplies and support prices,” said Mr Ciliandra Fangiono, FR chief executive officer.
He added that FR will continue to be alert to developments in the regulatory and macroeconomic environment, including geopolitical trade tensions and their potential impact on the market prices of palm and other competing oils.
