First Resources

First Resources: Maybank KE Research recently met CEO, Mr Ciliandra Fangiono, a second generation planter and major sh/h who takes a hands-on approach to the business. FR is guided firmly by its vision to grow upstream oil palm estates to 200k ha from 132.3k ha, supported by an unplanted landbank of ~140k – 150k ha. With a young tree age profile averaging 9 yrs, FR stands to enjoy ~10% yoy FFB output over the next 3 yrs. To capture margins across the value chain, FR invested in a refinery venture in 1Q11. Expansion is underway as FR plans to raise its refining capacity to 850k tpa (from 250k tpa) by 2Q13, in tandem with the growth of its CPO pdtn. FR may consider going further downstream (ie specialty fats and oleo chemical) once it achieves 200k ha planted area bcs at that size, it will be able to enjoy a stable stream of cash flow. MBKE expects FR to post 3Q12 results that beat estimates, tips stronger qoq and yoy net profit of at least US$54m. Notes stronger 3Q FFB (nucleus) output (+33% qoq, +12% yoy) should offset lower CPO spot ASP in 3Q12 (-11% qoq, -8% yoy). Keeps Buy rating with TP $2.15.