First Resources Limited Berhad : Let Down By Tree Stress And Plasma Farmers - 16/08/2010

♦ Affected by tree stress and low plasma yields. First Resources’ (FR) 1HQFY10 core net profit was below our and consensus estimates, making up 30-33% of FY10 projections, due to lower-than-expected FFB production of -9.6% yoy (-8.3% yoy from nucleus plantations and -21.4% yoy from plasma farmers) in 1H10 vs. our FY10 projections of +4.2% yoy. Management attributed the lower nucleus production to tree stress, while the lower growth from its plasma farmers was due to the effects of lower fertiliser application in 2007/2008, when fertiliser prices were very high. FR declared a 1 (S$) cent dividend in 2Q0 (2QFY09: 1 cent), translating to net payout of 30%, slightly higher than our projected 23% for FY10.

First Resources Limited Berhad : Let Down By Tree Stress And Plasma Farmers - 16/08/2010

First Resources Limited Berhad : Exponential Earnings Growth At Inexpensive - 3/6/2010

Small but growing fast. First Resources (FR) is a small (by Indonesian standards) but efficient pure plantation company listed in Singapore. FRhas 113,010ha of landbank in Indonesia. It currently operates 8 palm oil mills with total capacity of 435t/hr, while it has also ventured downstream, via a 250,000 tonne capacity refinery and a 250,000 tonne capacity biodiesel plant. It is currently in the midst of constructing a 300,000 tonne fractionation plant within the same downstream manufacturing complex, which will be completed by 1HFY12/011.

First Resources Limited Berhad : Exponential Earnings Growth At Inexpensive - 3/6/2010

Corporate Highlights...-24/05/2010

♦ First Resources Limited
New Coverage : Exponential Earnings Growth At Inexpensive Valuations

♦ QL Resources
Results Preview : Expecting Strong FY10 Results

♦ IJM Corporation
News Update : Kajang-Seremban Highway’s Traffic Falls Short Of Projection

♦ PLUS Expressways
Results / Briefing Note : 1QFY12/09 Traffic Volume Rises By 9.1%

♦ EON Capital
Results / Briefing Note : Starting Off On A Strong Note

♦ WCT
Results Note : 1QFY12/10 Net Profit Declines 11% YoY

Corporate Highlights...-24/05/2010

First Resources Limited : Exponential Earnings Growth At Inexpensive Valuations - 24/05/2010

Small but growing fast. First Resources (FR) is a small (by Indonesian standards) but efficient pure plantation company listed in Singapore. FR has 113,010ha of landbank in Indonesia. It currently operates 8 palm oil mills with total capacity of 435t/hr, while it has also ventured downstream, via a 250,000 tonne capacity refinery and a 250,000 tonne capacity biodiesel plant. It is currently in the midst of constructing a 300,000 tonne fractionation plant within the same downstream manufacturing complex, which will be completed by 1HFY12/011.

First Resources Limited :Exponential Earnings Growth At Inexpensive Valuations -24/05/2010

RHB Equity 360° (First Resources, QL, IJM, EON Cap, PLUS, WCT, Furniweb; Technical: Hai-O, CIMB) - 24/05/2010

Top Story : First Resources – Exponential earnings growth at inexpensive valuations - Outperform
New Coverage
♦ First Resources (FR) is a small (by Indonesian standards) but efficient pure plantation company listed in Singapore. FR has 113,010ha of landbank in Indonesia and currently operates 8 palm oil mills. It has also ventured downstream via a 250k tonne capacity refinery and a 250k tonne capacity biodiesel plant. It is currently constructing a 300k tonne fractionation plant which will be completed by 1HFY12/011.
♦ We believe there are five major reasons for investing in FR:
1) Its strong growth profile, given its young plantation age profile;
2) Aggressive planting targets, given its unplanted landbank;
3) Efficient planter, with below average cost of production;
4) Downstream expansion to boost bottomline; and
5) Valuations at unjustifiable significant discount to peers.
We project FR to post a core net earnings (ex-EI and biological gains/losses) CAGR of 59.8% over the next three years to FY12.
♦ FR is currently trading at 8.7x CY10 EPS and 7.2x CY11 EPS, which is a significant discount to the Malaysian plantation sector’s average PE of 19.2x for FY10 and 15.4x for FY11 and even to the regional plantation sector average of 12.6x for FY10 and 10.6x for FY11. Given FR’s efficiently-run estates, clean operating structure and sustainable earnings growth for the medium to long term, we believe FR does not deserve to trade at such a large discount to industry peers. We assign a target PE of 11.5x to FR’s FY11 EPS, which is a 30% discount to our Malaysian target PER for the mid-cap plantation stocks, to obtain our target price of S$1.55/share. We initiate coverage with an Outperform recommendation.

RHB Equity 360° (First Resources, QL, IJM, EON Cap, PLUS, WCT, Furniweb; Technical: Hai-O, CIMB) - 24/05/2010