First Resources’ share price down 30% on back of palm oil price crash

Find out why analysts are surprisingly upbeat.

First Resources has not been spared from the bloodbath that followed the unexpected crash in crude palm oil (CPO) prices. The company’s share price has corrected 30% from its 52-week high of $2.60 to $1.82 on the back of CPO price weakness and relatively weaker 1H14 earnings compared to its peers

According to UOB Kay Hian, the share price crash makes First Resources one of the cheapest high-growth plantation stocks. “This is a good opportunity to accumulate positions in a well-managed plantation company with good earnings prospects,” UOB Kay Hian notes.

The report also adds that First Resources is relatively better positioned among its peers to ride through the
headwinds and deliver decent profits.

“FR’s strength lies in its balanced age profile that ensures good production growth and cash flow. This, together with prudent cost control and flexible downstream operations, makes FR one of the most
profitable plantation companies. FR has a good earnings track record with high profit per CPO tonne and better refining margins. Its strategy to venture into biodiesel and refining businesses was well ahead of peers, making it among the early players which enjoyed large margins in 2012 and recovered its investment cost,” noted UOB Kay Hian.

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