SINGAPORE (Nov 16): Maybank Kim Eng Research is keeping its “hold” call on oil palm plantation First Resources with an unchanged target price of $2.04.
This comes after FR saw its earnings fall 11% to US$31.9 million ($43.4 million) in 3Q17, on the back of a 9.3% decline in revenue to US$137.4 million.
See: First Resources' 3Q earnings down 11% to $43.4 mil on lower revenue
“Results would have been better had it not for the sharp inventory build-up and lower-than-expected crude palm oil (CPO) average selling price (ASP) achieved during the quarter,” says analyst Ong Chee Ting in a report on Tuesday.
However, Ong notes that FR’s 3Q core earnings are in line with the research house’s expectations.
In addition, the analyst says FR’s fresh fruit bunches (FFB) nucleus output of 1,906,068MT in the first nine months of this year is on track to meet Maybank’s full-year forecast.
And Ong expects potentially better results for FR in the final quarter. “4Q17 results could still be better q-o-q, potentially to be lifted by some inventory drawdown (boosting sales), and higher q-o-q FFB output,” says Ong.
“While we like FR for its strong long term fundamentals, current year valuation is now close to its 5-year mean of approximately 17 times,” Ong adds.
As at 11.37am, shares of First Resources are trading 3 cents lower at $1.88, or 16.7 times FY17 earnings with a dividend yield of 1.8%.
