First Resources

First Resources: CIMB initaites coverage at Outperform with a $2.22 target based on 12.3X CY13 P/E. Amid expectations of lower CPO prices this year, CIMB advocates stocks that offer strong fresh fruit bunch growth prospects to cushion lower average selling prices and higher production costs. First Resources fares well in this regard, it says, noting its estates are nine years old on average, and are just entering the prime of their productivity cycle. The house anticipates additional income from First Resources' refinery expansion. Add that First Resources currently refines just half of its CPO output; with a new 600,000-tonne refinery coming on stream in 2H13, it will be able to refine its entire CPO production. This will allow the group to sell its palm products at higher prices as refined palm products attract lower export taxes. It tips free cash flow to improve in FY14 as capex scales down and operating cash flows improve, and believes there's room for bigger dividend payouts if no M&A opportunities emerge.