- RE-ITERATE BUY Entry – 1.74 Target – 1.90 Stop Loss – 1.66
- 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 at all-time highs, again. Malaysian palm oil futures exceeded RM7,000 to trade at all-time highs again on Thursday, as concerns over the tensions in Ukraine spilled over into the broader commodity market. On a fundamental level, palm oil supply-demand dynamics remains favourable going into 2022. In addition to supply constraints in Indonesia and Malaysia, the two largest producers, palm oil prices have been buoyed by higher prices of alternatives such as soybean due to yield losses in drought-hit South America.
- Strong 4Q2021 earnings. FR reported its FY2021 results today. FY2021 net profit surged 62% YoY to S$161mn on the back of a 56% increase in sales, driven by a combination of higher average selling prices and stronger sales volume. Balance sheet is rock solid with net gearing ratio at 0.02x and cash & bank balances at US$382mn as at end Dec-2021.
- Higher dividend. The group declared a final dividend of 5.10 Sing cents, bringing full-year ordinary dividend to 6.45 Sing cents, representing 50% of underlying net profit.
- Positive outlook. The group expects the global vegetable oil supplies to remain tight in the tearn-term due to negative impact of weather and the shortages of labour at the Malaysian palm oil plantations. Furthermore, supply is also impacted by the Domestic Market Obligation (DMO) policy by Indonesia requiring palm oil exporters to sell 20% of their export volumes domestically at a stipulated price.
PALM OIL FUTURES (KO1)
