First Resources

First Resources: DBSV maintains Buy with $2.16 TP. Counter is too cheap to ignore says house. 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% yoy; -26% qoq). Including non-operating items, 4Q12 net profit was booked at US$73.1m (-6% yoy; +14% qoq). DPS of S$0.025 was declared (payable 28 May13), which would bring its FY12 payout ratio to 26%. Net gearing (ex. NCI) stood at 12% at end-Dec 12. House understand Indonesian refined products are now offered at US$20/MT discount vs Malaysian spot prices. Imputing this in forecast for FR’s refined products (against 5% previously assumed) together with actual FY12 numbers, house have adjusted the group’s forward earnings slightly. All in, DCF-derived TP is unchanged at $2.16 (WACC 14%, ERP 8.2%, Beta 1.2, TG 3%). At current price 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.