First Resources: Citi maintains Buy, with TP $1.87. House note that Sept volume growth of 50k tons (+35% YoY, +28% MoM) appears highly skewed given fewer working days in Aug. CPO price is expected to hit a low of close to US$900/t in Oct/Nov 2011 and recover thereafter. Believe there is a low probability of a repeat of the 2008 price fall as combined total vegetable oil supply is tight relative to consumption. Higher CPO prices/vol in 2011 (vs. 2010), supported by current weak rupiah environment bodes well for FR.
At the current price, FR’s valuations are at 8.4x 2011E P/E and 8.2x 2012E P/E, still lower than its historical trailing PE average of 12.5x, and it offers an ETR of over 50%.
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