First Resources

First Resources: Good set of results with bottom-line above estimates, with revenue at US$174.6m, +6% y/y, while net profit at $63.6m, +30% y/y. Strong rev was mainly due to higher sales volumes of CPO, which rose 26.2% to 145k tons arising from the drawdown in inventory. Gross margins at 6% vs 5.7% y/y, mainly due to the decrease in purchases of palm oil products from third parties, partially offset by the higher sales volumes, fertiliser costs and wages and the increase in purchases of FFB from third parties. Operationally, the group registered lower FFB and CPO yield due largely to dilutive effect from higher percentage of young trees (vs. 1Q12) and the lower yielding plantations that were acquired, while the decline in CPO extraction rate was due to higher percentage of third party FFB purchases. Going forward, at least 25% of the group’s plantations are still immature and investors would expect production it to ramp up further as these plantations reach maturity. Despite recent volatility in palm oil prices, the Group remains positive on the long-term fundamentals of the palm oil industry.