First Resources

First Resources: 1Q14 net profit slumped 29.2% y/y to US$45m, as gross margin tumbled 18.2ppts to 42% on lower-than-expected average selling prices of CPO, partially offset by higher sales volumes from the refinery and processing segment. Subsequently, revenue improved 1.9% to US$177.9m. The first quarter earnings and revenue met 19% and 23% of consensus full year estimates. Maybank-KE believes that the weak refining margin is partly seasonal on the tight supply of CPO on low crop months, and also partly structural due to the excess refining capacity in Indonesia. The house expects stronger production in the coming quarters ahead and maintains its FY14 earnings forecast of US$204m. At $2.45, the counter trades at 13.2x forward P/E. Latest broker recommendations: Maybank-KE maintains Buy with TP of $2.70 CLSA cut to Sell, lowers TP to $2.40 (from $2.60)