First Resources - FFB production peaked in October

Management now guiding zero to 5% y-y 2013 FFB growth
The latest FFB production figures for October showe d 18.2% y-y blended growth, and, for 10M13, FFB production grew 3.8% y-y. Management said that October was FR’s peak producti on month and November and December’s FFB growth will be lower y- y, and at best, production will rise 5% y-y in 2013

FR will buy more third-party FFB to keep its mills running above 60% utilisation.

Our earnings estimates lowered for 2013-14
We lower our FFB assumptions for 2013 and 2014 to reflect lower FFB production. For 2013, we assume 3% y-y FFB growth (from 10%) while in 2014, we now expect 13% y-y FFB growt h (15%).

TP of SGD2.76 implies 23% upside
Our TP of SGD2.76 is based on 14.7x 2014 earnings, rolled-over. The P/E is unchanged and we arrive at a P/E of 14.7 x by imposing a 5% premium valuation to Indonesia’s historical plan tation sector P/E of 14x. This offers 23% upside potential over the n ext 13 months.

Technical Analysis
Daily Chart
Attractive maturity profile: 11,000ha will mature i n 2014
FR still has an attractive oil palm age distribution – 69% of trees are in the maturity stage. The average age of its oil p alms is eight years. There will be growth in the next three years from y oung mature trees coming to full maturity and those in full maturity moving to prime mature age. This will boost FFB production in 2014- 15. (Read Report)

Source : BNP Paribas Research

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