- RE-ITERATE BUY Entry – 1.60 Target – 1.80 Stop Loss – 1.55
- Established in 1992 and listed on the SGX since 2007, First Resources is one of the leading palm oil producers in the region, managing over 200,000 hectares of oil palm plantations across the Riau, East Kalimantan and West Kalimantan provinces of Indonesia. The group’s core business activities include cultivating oil palms, harvesting, and milling them into crude palm oil (CPO) and palm kernel (PK). In addition, the group through its refinery, fractionation, biodiesel and kernel crushing plants, processes its CPO and PK production into higher value palm-based products such as biodiesel, refined, bleached and deodorised (RBD) olein and RBD stearin, palm kernel oil and palm kernel expeller.
- Palm oil prices are back to all-time highs. Palm oil futures greeted the new year by surging to near all-time highs, triggered by concerns that heavy rain across seven states in Malaysia may slow down palm oil production. The Southern Peninsular Palm Oil Millers Association said it expects an 8.5% MoM decline in palm oil output from the Peninsular Malaysian region in December.
- 4Q2021 earnings is the key catalyst. Given stronger palm oil prices and the absence of hedging on the company’s part, we think 4Q results may surprise on the upside. The company is scheduled to report its full year results on 25 February 2022.
- Room to outperform consensus view. After the 20% rally in share price over the past year, analysts have turned more cautious. There are still 5 BUYS and 4 HOLDS as of 6 Jan 2022, but a shade lower than the 7 BUYS in the same period last year. However, against the cautious consensus backdrop, we think the company has more room to outperform when it reports its full year results.
Palm Oil Futures