First Resources Limited&rsquo s EB5 - indirect subsidiary, PT Karya Tama Bakti Mulia, has successfully bid for the acquisition of plantation assets held by PT Tri Bakti Sarimas for a cash consideration of IDR1.9 trillion ($164.9 million) on Jan 17.

 

The assets comprise mills, plantations and unplanted land bank covering a total site area of approximately 17,600 hectares located in Riau Province, Indonesia, and was concluded on 28 Dec 28, 2023 via a public auction.

 

The purchase price was arrived at based on the auction reserve price, which was set by Bank BRI after taking into consideration the most recent valuation performed by its appointed independent appraiser.

 

First Resources says the addition of these plantation assets marks a significant step in its expansion strategy. &ldquo This acquisition not only enhances the company&rsquo s operational footprint in the plantation industry but also aligns with its commitment to sustainable and profitable growth.&rdquo

 

The company anticipates that the integration of these assets will yield operational synergies and contribute positively to its overall performance, reinforcing the its position in the market and enhancing shareholder value.

 

The acquisition was funded by internal resources and is not expected to have any material impact on the consolidated net tangible assets and earnings per share of the company for the FY2023 ended Dec 31, 2023.

 

PALM oil producer First Resources has bought, through an indirect subsidiary, plantation assets held by Indonesian palm oil company PT Tri Bakti Sarimas for a cash consideration of 1.9 trillion rupiah (S$162.8 million). 

 

The assets include mills, plantations and an unplanted land bank spanning around 17,600 hectares in Riau province, Indonesia. The deal was concluded on Dec 28, 2023, via a public auction conducted by the Indonesia government for the execution of mortgage rights held by a bank, said First Resources in a bourse filing on Friday (Jan 5). 

 

The price tag of 1.9 trillion rupiah was based on the auction&rsquo s reserve price set by the bank after taking into consideration the asset&rsquo s most recent valuation performed by an independent appraiser, said the company.

 

It was funded by internal resources and is not expected to have any material impact on the company&rsquo s net tangible assets and earnings per share for FY2023. 

 

&ldquo This acquisition not only enhances the company&rsquo s operational footprint in the plantation industry but also aligns with its commitment to sustainable and profitable growth,&rdquo said First Resources. &ldquo The integration of these assets will yield operational synergies and contribute positively to (the company&rsquo s) overall performance&hellip enhancing shareholder value.&rdquo

PALM oil producer First Resources : EB5 -3.38% reported on Friday (Nov 10) a 56 per cent drop in its Q3 net profit to US$51.1 million, down from US$116.3 million from the same period last year.

 

Sales went down 31.4 per cent to US$248.3 million for the quarter, with the company hit by a net inventory build-up of 50,000 tonnes in the same period last year, there was a net drawdown of 14,000 tonnes, despite increased production levels.

 

For the third quarter, its crude palm oil production rose 13.5 per cent to 286,574 tonnes and palm kernel production grew 9.1 per cent to 62,067 tonnes.

 

First Resources also harvested 2.4 per cent more fresh fruit bunches in Q3 &ndash 1.1 million tonnes.

 

Its earnings before interest, taxes, depreciation and amortisation for the quarter fell 48.3 per cent to US$82.8 million.

 

On a year-to-date basis, sales volumes for the three quarters improved, due to the effects of a larger build-up in inventory from the temporary export ban last year.

 

Sales for the nine months were down 22.3 per cent to US$697.1 million and net profit dropped 53.2 per cent to US$118.8 million.

 

The group said: &ldquo Overall, the group&rsquo s performance reflected the effects of palm oil priced at lower levels in the first nine months of 2023, compared to the record-high prices last year.

 

&ldquo The fundamentals of the palm oil industry continue to be influenced by the macroeconomic environment and geopolitical tensions, as well as the potential impact of the brewing El Nino (weather phenomenon) on global supplies of palm and other vegetable oils.&rdquo

 

The group also noted that Indonesia&rsquo s policies, the B35 biodiesel mandate and Domestic Market Obligation, are expected to drive domestic demand and consumption.

 

For the three quarters, crude palm oil production improved 6.2 per cent to 693,222 tonnes, and palm kernel production increased 3 per cent to 150,301 tonnes. Fresh fruit bunches harvested fell 1.8 per cent to 2.6 million tonnes.

 

The group expects its output for Q4 to &ldquo taper off quarter on quarter from its peak production quarter&rdquo in Q3, while still showing growth against Q4 last year.

 

As at Sep 30, attributable equity decreased by 2.3 per cent to US$1.28 billion from US$1.3 million as at Dec 31. This was mainly due to dividends paid during the nine months, partially offset by foreign-currency translation gains from the appreciation of the Indonesian rupiah against the US dollar during the period.

 

The group also highlighted a healthy financial position with a gross gearing ratio at 0.17 times, as well as cash and bank balances of US$252.1 million as at Sep 30.

 

DBS Group Research highlighted that the Q3 earnings were ahead of its estimate and maintains its &ldquo buy&rdquo call with target price of S$2, which implies 12.5 times the research team&rsquo s forecasted FY2024 earnings.

 

The target price, based on a price-to-earnings (PE) ratio slightly higher than the company&rsquo s five-year average PE, factors in a recovering earnings outlook next year, after a challenging 2023.

 

&ldquo We believe First Resources&rsquo valuation is undemanding for a well-managed, young palm oil assets player, which can capitalise on recovering palm oil prices better than its peers with older assets,&rdquo said the research team.