Brokers' take: Analysts raise targets on First Resources on higher CPO prices

RHB and Maybank Securities have raised their target prices on First Resources after raising their FY2022-2023 forecasts on the back of higher crude palm oil (CPO) prices.

Maybank raised its target price to S$1.88 from S$1.68 and maintained its "hold" call on the stock due to limited upside. The move comes after the research team increased its FY2022 and FY2023 core profit after tax and minority interest (Patmi) forecasts by 35 per cent and 6 per cent respectively.

Maybank's new target price represents a potential downside of 0.5 per cent from the counter's trading price of S$1.89 as at 3.12 pm on Monday. Shares of First Resources were up 2.7 per cent or S$0.05 at the time.

Meanwhile, RHB has upped its target price to S$2 from S$1.60 and maintained "neutral" on First Resources. The new target price represents a potential upside of 5.8 per cent from the counter's trading price of S$1.89.

RHB raised its FY2022-23 earnings forecasts by 21-44 per cent, after taking into account higher CPO prices for both fiscal years. The new target price is 10 times the research team's FY2022 earnings estimates, including an 8 per cent ESG discount.

First Resources recently reported FY2021 results which missed RHB's estimates but beat Maybank's. That being said, FY2022 should be stronger given RHB's higher CPO price assumptions, partially offset by higher fertiliser costs, said RHB.

RHB also noted that First Resources is fairly valued. Its counter is trading 8.7 times its FY2022 earnings, in line with peers which are trading at 8-10 times.

In the report dated Feb 27, Maybank said it expects First Resources to deliver a 37 per cent year-on-year growth in FY2022 Patmi due to higher CPO average selling prices. It added that First Resources had "significantly lower" forward sales in FY2022 compared with FY2021.