First Resources: Singapore Company Focus
First Resources: Singapore Company Focus
First Resources: Singapore Company Focus
First Resources
Bloomberg: FR SP | Reuters: FRLD.SI
28 Feb 2013
Price Relative
S$ Relative Index 374 324 1.7 274 224 174 0.7 124 0.2 Feb-09 74 Feb-13 2.2
1.2
4Q12 core profit ahead of expectations. Stripping out biological asset gains (net of tax), First Resources (FR) booked 4Q12 core net profit of US$47.3m (-5% y-o-y; -26% q-o-q). Including non-operating items, 4Q12 net profit was booked at US$73.1m (-6% y-o-y; +14% q-o-q). DPS of S$0.025 was declared (payable 28 May13), which would bring its FY12 payout ratio to c.26%. Net gearing (ex. NCI) stood at 12% at end-Dec 12. Variance lies in borrowing costs. We had estimated c.50% more borrowing costs in FY12, despite redemption of the groups CB and overestimated the cost of RM600m Sukuk issued in Jul12 and RM400m issued in Dec12. However, this was offset by 71% y-o-y drop in 4Q12 refining EBITDA, due to drop in volume, ASP (i.e. high-cost inventory), and shift in less favourable export tax spread in Indonesia, with the drop in CPO prices. FY13F-14F tweaked 0-1%. We understand Indonesian refined products are now offered at US$20/MT discount vs Malaysian spot prices. Imputing this in our forecast for FRs refined products (against 5% previously assumed) together with actual FY12 numbers we have adjusted the groups forward earnings slightly. All in, our DCF-derived TP is unchanged at S$2.16 (WACC 14%, ERP 8.2%, Beta 1.2, TG 3%). BUY call reiterated. At current price we believe the market has already imputed softer results this year from lower CPO prices and higher borrowing costs. Catalyst for the stock includes boost from additional refining capacity to come onstream in FY14F and recovery in CPO prices in FY15F.
At A Glance Issued Capital (m shrs) Mkt. Cap (S$m/US$m) Major Shareholders Eight Capital (%) FMR (%) DB Intl Trust Spore (%) Free Float (%) Avg. Daily Vol.(000)
Feb-10
Feb-11
Feb-12
Turnover EBITDA Pre-tax Profit Net Profit Net Pft (Pre Ex.) Net Pft (ex. BA gains) EPS (S cts) EPS Pre Ex. (S cts) EPS Gth (%) EPS Gth Pre Ex (%) Diluted EPS (S cts) Net DPS (S cts) BV Per Share (S cts) PE (X) PE Pre Ex. (X) P/Cash Flow (X) EV/EBITDA (X) Net Div Yield (%) P/Book Value (X) Net Debt/Equity (X) ROAE (%) Earnings Rev (%): Consensus EPS (S cts): Other Broker Recs:
603 365 326 237 237 211 18.5 18.5 12 12 18.5 3.7 86.5 10.4 10.4 12.5 7.3 1.9 2.2 0.1 23.8
663 295 246 181 181 181 14.2 14.2 (24) (24) 14.2 4.6 95.6 13.7 13.7 11.2 9.0 2.4 2.0 0.1 15.6 0.9 18.3 B: 15
765 364 317 233 233 233 18.2 18.2 29 29 18.2 4.9 108.9 10.6 10.6 9.0 6.9 2.5 1.8 CASH 17.8 (0.4) 20.7 S: 0
891 422 379 279 279 279 21.8 21.8 20 20 21.8 6.0 124.7 8.9 8.9 7.6 5.6 3.1 1.6 CASH 18.7 (1.0) 27.3 H: 1
ICB Industry : Consumer Goods ICB Sector: Food Producers Principal Business: FR is mid-sized planter with strong balance sheet and high growth outlook. FR has aggressively planted since 2004.
56,076 838
72,888 11,112
83,307 11,771
74,476 5,796
66,682 4,500
78,606 16,223
73,101 3,366
EBITDA margin
To t al EBI T DA (US$ m )
1.7%
56,914
19.4%
84,000
17.7%
95,078
8.3%
80,272
6.6%
71,182
23.7%
94,829
9.1%
76,467
505 2,313
515 20
509 242
532 222
481 89
448 73
488 271
417 90
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Sensitivity Analysis
2013
CPO price (RM/MT) Mature oil palm CPO sales volume (MT) Palm kernel sales vol. Avg. USD/IDR rate
We expect CPO prices to remain weak over the next two years
Segmental Breakdown
FY Dec 2011A 2012F 2013F 2014F 2015F
Revenues (US$m) CPO Palm kernel Olein, RBDPO, biodesel PKO Others Total
66.0% 61.0% 56.0% 51.0% 46.0% 41.0% 36.0% 31.0% 26.0% 2011A 2012F 2013F 2014F 2015F
Operating Margin % Net Income Margin %
Revenue Cost of Goods Sold Gross Profit Other Opng (Exp)/Inc Operating Profit Other Non Opg (Exp)/Inc Associates & JV Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Pre-tax Profit Tax Minority Interest Preference Dividend Net Profit Net Profit before Except. EBITDA Growth Revenue Gth (%) EBITDA Gth (%) Opg Profit Gth (%) Net Profit Gth (%) Margins & Ratio Gross Margins (%) Opg Profit Margin (%) Net Profit Margin (%) ROAE (%) ROA (%) ROCE (%) Div Payout Ratio (%) Net Interest Cover (x)
495 (149) 346 (35) 310 (1) 0 (28) 0 282 (76) (9) 0 196 196 331 49.9 28.4 31.0 37.3 69.9 62.8 39.7 24.6 14.4 17.6 17.6 11.2
603 (221) 382 (49) 334 10 0 (17) 0 326 (78) (11) 0 237 237 365 22.0 10.4 7.5 20.7 63.3 55.3 39.3 23.8 13.8 15.6 19.8 19.8
663 (311) 353 (85) 267 2 0 (22) 0 246 (57) (9) 0 181 181 295 9.9 (19.3) (19.9) (23.5) 53.2 40.3 27.3 15.6 9.2 11.0 32.7 12.0
765 (338) 428 (94) 333 2 0 (18) 0 317 (73) (11) 0 233 233 364 15.4 23.5 24.7 28.6 55.9 43.5 30.4 17.8 10.9 13.0 26.7 18.7
891 (378) 514 (124) 389 2 0 (12) 0 379 (87) (13) 0 279 279 422 16.5 15.8 16.9 19.8 57.6 43.7 31.3 18.7 11.9 13.8 27.5 33.6
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Revenue Trend
180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0
2Q2010 3Q2010 4Q2010 1Q2012 2Q2012 3Q2012 1Q2011 2Q2011 3Q2011 4Q2011
Revenue Cost of Goods Sold Gross Profit Other Oper. (Exp)/Inc Operating Profit Other Non Opg (Exp)/Inc Associates & JV Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Pre-tax Profit Tax Minority Interest Net Profit Net profit bef Except. EBITDA Growth Revenue Gth (%) EBITDA Gth (%) Opg Profit Gth (%) Net Profit Gth (%) Margins Gross Margins (%) Opg Margins (%) Net Profit Margins (%)
Revenue
Net Fixed Assets Invts in Associates & JVs Other LT Assets Cash & ST Invts Inventory Debtors Other Current Assets Total Assets ST Debt Other Current Liab LT Debt Other LT Liabilities Shareholders Equity Minority Interests Total Cap. & Liab. Non-Cash Wkg. Capital Net Cash/(Debt) Debtors Turn (avg days) Creditors Turn (avg days) Inventory Turn (avg days) Asset Turnover (x) Current Ratio (x) Quick Ratio (x) Net Debt/Equity (X) Net Debt/Equity ex MI (X) Capex to Debt (%) Z-Score (X)
275 0 908 210 39 34 34 1,500 89 88 261 134 885 44 1,500 19 (139) 17.5 156.4 83.0 0.4 1.8 1.4 0.1 0.2 45.8 5.0
321 0 1,049 405 58 35 63 1,931 40 90 498 145 1,106 51 1,931 65 (133) 20.8 118.3 89.3 0.4 4.3 3.4 0.1 0.1 24.1 5.8
321 0 1,153 432 60 32 33 2,031 1 145 535 67 1,222 60 2,031 (20) (105) 18.4 116.8 75.9 0.3 3.8 3.2 0.1 0.1 23.3 5.7
307 0 1,215 569 66 37 36 2,229 1 159 535 69 1,393 71 2,229 (21) 33 16.3 140.5 74.6 0.4 4.4 3.8 CASH CASH 14.2 5.3
297 0 1,278 735 73 43 40 2,467 1 180 535 71 1,596 84 2,467 (24) 199 16.2 137.7 73.1 0.4 4.9 4.3 CASH CASH 15.4 NA
Inventory 7.3%
Assocs'/JVs 0.0%
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Capital Expenditure
180000 160000 140000 120000 100000 80000 60000 40000 20000 0 2011A 2012F 2013F 2014F 2015F
Pre-Tax Profit Dep. & Amort. Tax Paid Assoc. & JV Inc/(loss) Chg in Wkg.Cap. Other Operating CF Net Operating CF Capital Exp.(net) Other Invts.(net) Invts in Assoc. & JV Div from Assoc & JV Other Investing CF Net Investing CF Div Paid Chg in Gross Debt Capital Issues Other Financing CF Net Financing CF Currency Adjustments Chg in Cash Opg CFPS (US cts.) Free CFPS (US cts.)
282 22 (76) 0 (38) (20) 169 (160) 0 0 0 (27) (187) (35) 44 12 (3) 19 0 1 14 1
326 22 (78) 0 (47) (26) 198 (130) 0 0 0 (48) (177) (47) 189 32 0 173 0 194 15 4
246 26 (57) 0 85 (80) 221 (125) 0 0 0 (3) (128) (59) (2) (6) 1 (66) 0 27 9 6
Cl o s i n g Ta rg e t Pri c e Pri c e 28 Feb 12 1.84 2.15 08 May 12 1.83 2.15 Da te 15 May 12 24 Jul 12 15 Aug 12 22 Oct 12 12 Nov 12 11 Jan 13 20 Feb 13 1.75 2.00 2.04 2.03 2.08 1.99 1.95 2.15 2.15 2.15 2.03 2.18 2.18 2.16
4 1 2 3
Apr-12 Jun-12
7 8 9
5: 6: 7: 8: 9:
1.46 Feb-12
Aug-12
Oct-12
Dec-12
Not e : Share price and Target price are adjusted for corporate actions.
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DBSV recommendations are based an Absolute Total Return* Rating system, defined as follows: STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame) BUY (>15% total return over the next 12 months for small caps, >10% for large caps) HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps) FULLY VALUED (negative total return i.e. > -10% over the next 12 months) SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)
GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Vickers Research (Singapore) Pte Ltd ("DBSVR"), a direct wholly-owned subsidiary of DBS Vickers Securities (Singapore) Pte Ltd ("DBSVS") and an indirect wholly-owned subsidiary of DBS Vickers Securities Holdings Pte Ltd ("DBSVH"). This report is intended for clients of DBSV Group only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVR. It is being distributed in the United States by DBSV US, which accepts responsibility for its contents. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBS Vickers Securities (USA) Inc (DBSVUSA) directly and not its affiliate. The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBSVR, DBSVS, and/or DBSVH) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. DBSVR accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. DBSVH is a wholly-owned subsidiary of DBS Bank Ltd. DBS Bank Ltd along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. DBSVR, DBSVS, DBS Bank Ltd and their associates, their directors, and/or employees may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report. The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by DBSVR, DBSVS and/or DBSVH (and/or any persons associated with the aforesaid entities), that: (a) (b) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein.
Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report. DBS Vickers Securities (USA) Inc ("DBSVUSA")"), a U.S.-registered broker-dealer, does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.
ANALYST CERTIFICATION The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of 28 Feb 2013, the analyst and his / her spouse and/or relatives who are financially dependent on the analyst, do not hold interests in the securities recommended in this report (interest includes direct or indirect ownership of securities, directorships and trustee positions).
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COMPANY-SPECIFIC / REGULATORY DISCLOSURES DBS Vickers Securities (Singapore) Pte Ltd and its subsidiaries do not have a proprietary position in the company mentioned as 1. of 26-Feb-2013 2. DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBS Vickers Securities (USA) Inc ("DBSVUSA"), a U.S.-registered brokerdealer, may beneficially own a total of 1% or more of any class of common equity securities of the company mentioned as of 28 Feb 2013. Compensation for investment banking services: i. DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBSVUSA may have received compensation, within the past 12 months, and within the next 3 months receive or intends to seek compensation for investment banking services from the company mentioned. DBSVUSA does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.
3.
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