“First Resources Stock Upgraded to BUY: Strong FY24 Results & 20% Upside Potential”

Overview and Investment Recommendation

The report presents an in‐depth analysis of First Resources (FR SP), a key player in the palm oil plantations space. The core message highlights a tactical upgrade with an improved BUY recommendation and a revised price target of SGD1.69 — up from SGD1.60. The recommendation is based on robust performance in FY24 core profit after tax and minority interest (PATMI), an attractive single-digit price-to-earnings ratio for FY25, and a healthy dividend yield in excess of 6%. Despite some expected EPS retracement in FY25, the valuation remains compelling at a 9x FY25 PER, trading near one standard deviation below the historical earnings mean.

Strong FY24 Performance Across Segments

The report emphasizes that First Resources beat both internal and street estimates in FY24 via solid contributions from both the upstream (plantations) and downstream (refinery and processing) segments. The key highlights include:

Core PATMI Achievement: The company reported a 2H24 core PATMI of USD137 million, representing a robust 75% Year-on-Year (YoY) growth, which brought FY24’s core PATMI to USD228 million with an overall 56% YoY increase.
Plantation EBITDA Improvement: A marked increase in plantation EBITDA to USD243 million (a 41% YoY rise) was driven by better crude palm oil (CPO) prices (up 13% YoY), a significant surge in palm kernel (PK) average selling prices (up 73% YoY), and improved fresh fruit bunches (FFB) output (+6% YoY).
Downstream Turnaround: The downstream segment returned to the black, posting an EBITDA of –USD10 million in 2H24 and a margin improvement of 6.9 percentage points YoY.

Detailed Financial and Operational Metrics

The report provides an extensive breakdown of First Resources’ financial performance across FY23A to FY27E. Key financial metrics and forecasts include:

Revenue and Profitability: Revenues in FY24 reached USD1,039 million, while core EPS jumped from 9.3 cents in FY23A to 14.7 cents in FY24A. The core PATMI surged to meet over 105% of full-year estimates, underscoring solid bottom-line performance.
Margins and Efficiency: The core EBITDA margin expanded significantly with improvements noted across both plantation and downstream operations. The effective tax rate remained competitive, and all profitability ratios—including EBIT and pretax margins—showed strong progression, reflecting efficient cost management.
Balance Sheet and Cash Flow: Total assets grew steadily to reach over USD2,081 million in FY25E, with a strong equity base and minimal net gearing (net cash position). The company’s cash conversion cycle, working capital management, and free cash flow generation remain healthy, ensuring ample liquidity for future growth and capital expenditure.

Operational Performance and Production Highlights

Operational metrics underscore First Resources’ robust production output:

FFB Nucleus Output: The FFB nucleus output increased by 6% YoY, reaching nearly 1.85 million tonnes in the latest period— underscoring operational resilience in plantation activities.
CPO and PK Production: CPO production, crucial to the company’s core operations, grew by over 5% YoY, while PK production saw a modest increase with improved selling prices, contributing to the overall revenue uplift.
Sales and Deferred Delivery: Although there was a net inventory build-up of 78,000 tonnes due to deferred sales, the management clarified that this inventory effect understated the earnings performance.

Guidance, Forecasts, and Future Outlook

Looking ahead to FY25, the company has provided encouraging operational guidance and proactive cost management measures:

Unit Cash Cost Reduction: For FY25, First Resources expects its unit cash cost to decline to approximately USD280-300/t, representing a reduction of between 3% and 10% YoY. This improvement is primarily driven by lower fertiliser costs and higher yields.
FFB Output Growth: The company guides for a 5% YoY growth in FFB nucleus output for FY25—and a slightly more conservative +3% YoY growth as per the MIBG forecast. Notably, the company has not ventured significant forward sales for FY25.
PATMI Forecasts: FY25 and FY26 core PATMI forecasts have been raised by 4% and 3% respectively, reflecting an improved downstream outlook and enhanced production guidance. The final dividend per share (DPS) proposal of 6.3 cents SGD for FY24 brings the total annual DPS to 9.8 cents on a 50% dividend payout ratio.

Valuation and Market Position

The attractive valuation of First Resources is highlighted by:

Price-to-Earnings Ratio: Trading at a single-digit core P/E ratio (7.8x for FY25E), the company is well positioned amid an industry rating near one standard deviation below the historical earnings mean of 6 years.
Dividend Yield: With a net dividend yield estimated above 6%, the stock presents an additional income proposition for investors.
Technical Positioning: The current trading levels, combined with solid performance and positive operational outlook, justify the continued bullish sentiment. Technical indicators, such as the 12-month forward rolling P/E, further support the investment thesis.

Risk Factors and Considerations

The report also provides a detailed risk statement that outlines potential challenges facing the palm oil sector and First Resources. These include:

Weather anomalies that could impact production output.
Lower-than-expected CPO prices and subdued price realization for downstream products.
Import country policy changes and potentially unfriendly domestic policies, especially within Indonesia.
Potential impacts from lower crude oil prices on palm biodiesel demand.
Competition from weaker competing oil prices such as soybean and rapeseed oil.
RSPO membership suspension risk if deforestation allegations are substantiated.

Historical Recommendations and Rating Trajectory

The report details a dynamic rating history with multiple adjustments over time. Notably:

Initial ratings ranged from Hold to Sell with conservative price targets around SGD1.9 in early 2022 and 2023.
Progressive upgrades to BUY during the latter part of 2023 and into early 2024, culminating in the latest BUY recommendation with a target price of SGD1.69 in March 2025.

Conclusion

First Resources stands out as a compelling investment case within the palm oil sector. The report by Maybank Research Pte Ltd elaborates on an impressive FY24 performance — supported by both upstream and downstream segments — and a clear strategic focus on cost optimization, production efficiency, and revenue growth. The downgrade in technical risks, combined with the tactical upgrade to BUY and an enhanced price target, positions First Resources attractively for investors seeking sustainable dividends and a favourable earnings multiple in a market replete with uncertainties. The detailed financial insights, robust operational metrics, and comprehensive forward guidance make it a notable addition to portfolios looking to tap into the cyclical growth potential of the palm oil industry.