Monday, March 22, 2010

First Resources - FY 2009 Detailed Fundamental Analysis

First Resources Limited is one of the leading oil palm plantation companies in Indonesia. It is an upstream operator with primary business activities in the cultivation and harvesting of oil palms, and the processing of fresh fruit bunches into crude palm oil for local and export sales. Established in 1992, FR is one of the fastest-growing plantation companies in the region. It manages more than 100,000 hectares of planted oil palm plantations and operate 8 palm oil mills in Indonesia. FR's plantations produced approximately 1.4 million tons of fresh fruits bunches and 323,000 tons of crude palm oil in 2008.

Following my profitability analysis and valuation analysis, FR has proven to be one of the interesting stocks amongst the 5 palm oil listed business in SGX. The following charts are a detailed fundamental analysis of First Resources from FY 2006 - FY 2009. (click charts for full sized image)

First Resources scored very well on the comparative profitability analysis, coming in first amongst its peers. It is interesting to note that this is despite the fact that its profitability numbers actually declined from FY2008 to FY2009. Across the board FR shows consistently high profitability. It consistently posts ROE above 20% and ROA above 15%. FR's high profitability is not a flash in the pan.

FR's profit margins are also consistent. Even with the big fluctuations in CPO prices up and down, gains in biological assets appear to be quite consistent over time. Gross and operating margins are also fairly consistent. Net profit margin has been rising since FY 2007, it is likely to revert to the mean.

FR's leverage has been consistently improving over time since IPO. If the company keeps this up, this is good for shareholders as it means that financial risk is lowered.

Asset utilisation is fairly consistent. Good upward trend in the receivables turnover.

Fairly consistent asset composition.

All in all, nothing very alarming, in fact good profitability numbers over time are a good sign for prospective investors in this stock.

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