Leow says First Resources is on track to meet Fresh Fruit Bunches (FFB) production growth forecast of 18% y-o-y for 2017. For 9M17, FFB nucleus production reached 1.9 million tonnes, accounting for 68% of UOB’s 2017 estimate.
CPO production also rose 34.9% q-o-q and 6.3% y-o-y in 3Q17.
“We expect 4Q17 FFB nucleus production to fill up the remaining 32% of our 2017 estimate. Hence, we believe First Resources can meet our FFB production forecast of 2.8 million tonnes for 2017,” says the analyst.
Meanwhile, refining earnings in 3Q17 are expected to stabilise as refining volume is expected to be higher q-o-q and y-o-y on the back of more feedstock available in the market while refining margin is expected to be better y-o-y but lower q-o-q.
And although biodiesel subsidy has been reduced, biodiesel delivery volume has returned to normal levels since Jun 17, making it profitable for First Resources.
“Maintain ‘hold’ and target price of $1.95, based on 16 times FY18 earnings, or its five-year mean PE. Entry price is $1.75,” says Leow.
Shares in First Resources are trading at $1.93.
