William Simadiputra of DBS Group Research has kept his "buy" call on First Resources , along with a target price of $2. In his Dec 10 note, the analyst believes the Indonesia-based palm oil player is enjoying a "positive" earnings momentum outlook, thanks to higher crude palm oil prices and also refining margins.
Favourable Indonesia expert tax structures and growing downstream demand, especially from key market China, are positive attributes too, says Simadiputra, who figures crude palm oil prices to average US$950 per metric tonne in 2025, up 3% y-o-y.
He estimates that First Resources, coming off an already strong FY2024, to grow its earnings by 9.1% y-o-y in the coming FY2025 to US$206 million. "The strong CPO price momentum should provide strong support to 1H25 earnings, thanks to its forward sales scheme."
Furthermore, First Resources enjoys a "favourable" age profile for its trees. According to Simadiputra, 58% of the company's trees are within the so-called "prime age" cycle, which suggests higher yield versus some of the competition.
"First Resources has room to keep its organic growth strong via replanting and channelling more crude palm oil to its refining facilities if downstream margins improve," the analyst adds.
While he has maintained his upward earnings forecast to FY2026, the analyst, on the other hand, expects lower free cash flow to firm (FCFF) in new terminal year in line with ageing pattern of trees, thereby, maintaining his target price at $2.
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"We believe First Resources can deliver steady earnings with its integrated business platform, while its trees productivity is more stable and steadier versus its peers in general," he says.
For him, key risks include lower-than-expected crude palm oil selling prices. Also, if there are any changes in the levy structure or domestic pricing regulations, or if prices drop below forecasts, First Resources may miss his earnings estimates, thus hindering any prospects of a valuation re-rating.
First Resources closed Dec 13 at $1.47, unchanged for the day, and up 2.08% year to date.
