First Resources

First Resources: Flat 3Q13 revenue at US$153.0m (+0.8% y/y), but net profit declined 20% to US$51.4m, mainly due to a decline in gross margins to 63.3% from 71.3%. Accordingly, EBITDA margin fell to 56% from 62.5%. Operationally, the group saw increased sales volumes of CPO (+25.7%) and palm kernel (+14.1%), but this was offset by lower refinery and processing volumes (-19.0%) and lower ASPs across the segments. Meanwhile, gross margins declined due to an increase in purchases of FFB from third parties (including plasma farmers), as well as a shift in product mix of refined products sold from Refined Bleached Deodorised palm olein to biodiesel. On outlook, mgt notes recent palm oil prices have gradually recovered, supported by incremental energy-based demand, lower than expected pdtn growth and modest inventory build-up. Longer term, palm oil prices will continue to be influence by its relative pricing against crude oil and other competing edible oils such as soybean oil. On the pdtn front, the group expects pdtn growth to slow in 4Q13 as pdtn has peaked seasonally in 3Q. At the last close of $2.14, the counter trades at 16.7x annualized 9M13 P/E, 2.8x P/B.