Money Talk: First Resources, offshore and marine sector, King Wan

First Resources' Q2 core net profit of US$26 million (-31 per cent year-on-year, -42 per cent quarter-on-quarter) met 13 per cent of our FY2014 forecasts and 12 per cent of consensus'. -- PHOTO: BLOOMBERG
First Resources' Q2 core net profit of US$26 million (-31 per cent year-on-year, -42 per cent quarter-on-quarter) met 13 per cent of our FY2014 forecasts and 12 per cent of consensus'. -- PHOTO: BLOOMBERG

SINGAPORE - Stay up to date on market chatter with our picks of the latest broker research reports, compiled by The Straits Times Money Desk.

1. First Resources

Broker: Maybank Kim Eng

First Resources' Q2 core net profit of US$26 million (-31 per cent year-on-year, -42 per cent quarter-on-quarter) met 13 per cent of our FY2014 forecasts and 12 per cent of consensus'.

We cut our FY2014-2016 forecast earnings per share. Still, we believe First Resources will deliver stronger second-half earnings. Its integrated model, namely its biodiesel division, will benefit from present low crude palm oil prices.

We like First Resources for its proven management and its long-term value proposition, backed by its plantable reserves of 100,000 ha and young trees with an average age of eight years, which will sustain a projected 11.8 per cent compound annual growth rate in fresh fruit bunches output, and a low cost of production.

Maintain Buy with a revised target price of $2.43.

2. Offshore and marine sector

Broker: CIMB

Only 50 per cent of China-made rigs could make it to the market in 2014-2015 given the rampant delays at its yards. As such, we think the influx of newbuild rigs could be at a more controlled pace, keeping the jack-up rig rates firm for the next two years.

Stronger-than-expected orders and margin expansion are key potential catalysts for the sector. We believe newbuild trend for jack-up rigs will take a short pause in the next 12 months as drillers focus on filling their new rigs (built by reputable yards) with charters and opportunities for distressed asset sales.

Pending the next upsurge in orders, we see opportunities in second-tier names with cheaper valuations and exponential growth potential.

Our top sector picks are Keppel Corp, Swissco Holdings, Ezion Holdings and Mermaid Maritime. Maintain Neutral.

3. King Wan

Broker: OSK-DMG

King Wan posted an exceptionally strong Q1 FY2015 net profit of $25.9 million, boosted by a $24 million profit from the sale of its Thai associates. Its orderbook of $164 million provides two years of earnings visibility.

We continue to forecast a three-cent dividend going forward, implying a 9.2 per cent yield.

Our valuation stands at $0.525 per share, supporting our $0.43 target price based on a 7 per cent required yield. Maintain Buy.