First Resources - Impacted by Lower Price and Volumes

1Q15 results impacted by lower price and volumes 
1Q15 NPAT US$29m (- 39% YoY, -53% QoQ), 16% FY15E consensus estimates (historical average contribution of 28% from FY12-14). Decline mainly due to lower ASPs and sales volumes of palm-based products, and a net inventory build-up of ~20kt in 1Q15 vs. net inventory drawdown of ~20kt 1Q14. Upstream EBITDA US$53m (-18% YoY, -32% QoQ), with downstream EBITDA at US$1.5m (-49% YoY, -72% QoQ).

Increased FFB bucks negative trend at peers 
1Q15 FFB 581kmt (+16% YoY, -13% QoQ), and CPO production at 145kt (+10% YoY, -15% QoQ). Positive FFB growth bucked negative trends at peers, a function of FR’s lower base in 1Q14. Production volumes grew on yield recovery (FFB yield at 4 ton/ha, +0.2ton/ha YoY) and increased mature hectarage to 145k ha (+10% YoY, +10% QoQ). Planted hectarage increased to 197k ha (+10% YoY, +1% QoQ). Sales volume of CPO (148kt, -10% YoY, -17% QoQ) and PK (34kt, -1% YoY, -24% QoQ) decreased due to lower purchases of palm oil products from third parties (i.e., less refinery activities).

Lower contribution from downstream business 
Refinery and Processing EBITDA contribution at US$1.5m, 3% of total EBITDA (1Q14 US$2.9m, 4% of total EBITDA), due to significant decrease in 1Q15 sales volume to 42kt (-67% YoY, -73% QoQ) on a slowdown of processing activities at FR’s refinery, fractionation and biodiesel plants in view of weak refining margins.

Technical Analysis
Daily Chart
Maintain Buy rating and TP 
FR remains our key ASEAN planter pick for its young plantation profile (weighted age 8 years) and its ~15% CAGR in planted hectarage, which provides future growth to its plantation segment earnings. (Read Report)

Source : Citi Research

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