Maybank Research Pte Ltd

May 16, 2025

First Resources (FR SP): 1Q25 Results Beat Expectations; Tactical Upgrade to BUY

Executive Summary

• First Resources’ (FR) 1Q25 headline PATMI exceeded both internal and market expectations. [[1]]
• Despite anticipating a seasonally weaker 2Q25 due to lower output, earnings are expected to rebound in 2H25. [[1]]
• Recent price declines are viewed as incorporating market negatives, presenting a favorable entry point. [[1]]
• EPS forecasts have been adjusted to account for higher export levies and the acquisition of Austindo (ANJ) assets. [[1]]
• A tactical upgrade from HOLD to BUY is recommended, driven by an attractive net dividend yield exceeding 5% and a potential 12% total return to a revised TP of SGD1.57. [[1]]
• Optimizing costs and divesting loss-making ANJ businesses could lead to further EPS forecast upside. [[1]]

1Q25 Performance: Driven by ASPs and Output

• 1Q25 headline PATMI reached USD63m, marking a 75% YoY increase and surpassing estimates. [[1]]
• Strong performance attributed to higher average selling prices and increased sales volume, supported by improved FFB nucleus output (+12% YoY, -18% QoQ). [[1]]
• Inventory saw a net build-up of 18,000t in 1Q25. [[1]]
• Fertilizer application is on track, with approximately 25% of the annual plan completed in 1Q (1Q24: ~20%). [[1]]

Downstream Margins Show Promise

• Downstream division margins were positive, bolstered by biodiesel plants benefiting from elevated glycerin prices. [[1]]
• Biodiesel capacity has nearly tripled since January 2025, from 250,000 tpa to 700,000 tpa. [[1]]
• Increased biodiesel volume to meet the government’s B40 mandate. [[1]]

ANJ Acquisition and Export Levy Adjustments

• FY25E FFB nucleus output growth forecast revised to 20% YoY, incorporating ANJ’s contribution effective May 6. [[1]]
• FR acquired 91.2% of ANJ for USD330m cash and has offered to buy out the remaining minority stake at the same price, potentially requiring a total cash outlay of USD362m. [[1]]
• ANJ’s purchase is expected to be EPS neutral for FY25E. [[1]]
• Increased export levies for CPO by the Indonesian government (10% from 7.5% effective May 17) factored into forecasts, lowering net CPO ASP in the domestic market. [[1]]
• Overall, FY25E-27E EPS trimmed by -3%/-4%/-3%. [[1]]

Revised Target Price and Recommendation

• Upgrade to BUY (from HOLD). [[1]]
• 12-month Price Target: SGD 1.57 (+12%). [[2]]
• Previous Price Target: SGD 1.69. [[2]]

Company Overview

• First Resources Ltd. cultivates oil palms in Indonesia and operates palm oil refinery and biodiesel processing facilities. [[2]]
• Market capitalization: USD1.8B. [[2]]
• Issued shares: 1,584m. [[2]]
• Free float: 26.3%. [[2]]
• Major shareholders: TMF Group BV (64.7%), King Fortune Trust (5.6%), Fidelity/ FMR / Abigail (4.2%). [[2]]

Financial Statistics and Forecasts

1Q25 Results Review

Operational Data

Earnings Revision Analysis

Key Assumptions

Risk Factors

• Weather anomalies affecting output growth. [[3]]
• Lower-than-expected CPO prices. [[3]]
• Negative policies from import countries. [[3]]
• Unfavorable Indonesian government policies. [[3]]
• Lower crude oil prices impacting biodiesel demand. [[3]]
• Weaker competing oil prices. [[3]]
• Potential RSPO membership suspension. [[3]]

Financial Summary

Key Ratios