First Resources

First Resources: Announced strong set of results which was at the top end of bullish estimates. Rev at US$165.9m, +81.7% yoy and +4.2% qoq, while net profit at US$49.0m, +60.2% yoy and -37% qoq. Gross Margins however fell to 57.2% vs 69.8% yoy and 70.7% qoq. Low qoq bottom-line was largely attributed to biological gains by grp in 4Q11. Overall sales improved on back of increased sales volumes from the Plantations and Palm Oil Mills segment as well as the Refinery and Processing segment. With increased production from the Group’s biodiesel, refinery and fractionation plants, the Refinery and Processing segment contributed 35.8% to Grp’s sales in 1Q2012 (1Q2011: 3.6%). Gross Margins were weaker mainly due to the higher production and sales vol, higher fertilizer costs and higher wages (due to the larger scale of operations and wage inflation). There was also an increase in purchase of FFB and other palm oil products from third parties (including plasma farmers.) Going forward, grp positive on prospects, noting that CPO prices remains firm in 1Q12, backed by strong demand growth from emerging markets, seasonal slowdown in production and weaker soybean production from Latin America. With its favourable plantation age profile, Grp expects yoy vol growth to continue for the rest of yr, albeit at a more moderate rate. Ratings as follow: Maybank Kim Eng maintains Buy with $2.15 TP UOB Kay Hian maintains Buy with $2.30 TP