First Resources

First Resources: Maybank Kim Eng initiates coverage with Buy Call and $1.79 TP. House note that with a young palm age profile of 8 years, grp offers a 12% CAGR in FFB output over FY10-14F (or +57% in four yrs) to bring total FFB output to 2.5m tones and is reaping the rewards from disciplined planting, averaging 10,400 ha p.a. over the last five yrs

Despite having a young age profile, FR achieved a low all-in cost of production of USD292/t on the back of FFB yields of 20.2t/ha/yr (FY10) and ranks the second-lowest in terms of production cost among house coverage of palm oil planters, just above IOI Corp.

FR’s low cost structure will help provide greater resilience through price cycles and this is supported by its unplanted landbank of c.155,000 ha in Kalimantan, which is sufficient to sustain its planting target of 12,000-15,000 ha p.a over the next 8-12 yrs. Fundamentals remain sound with a healthy balance sheet to spur expansion and net
gearing at 21% and a policy of paying out up to 30% of yearly profits as dividends.