Upon completion of proposed acquisition, its subsidiary will own 91.2% of the oil palm company and will have to make mandatory offer for remaining shares

 

[SINGAPORE] First Resources&rsquo : EB5 0% majority-owned subsidiary Ciliandra Perkasa on Tuesday (Mar 18) entered a conditional shares purchase agreement to buy 3.1 billion shares or 91.2 per cent of the issued and paid-up capital of Austindo Nusantara Jaya for US$329.8 million.

 

The target company is listed on the Indonesia Stock Exchange (IDX), and is primarily engaged in the business of oil palm plantation. 

 

It is also a holding company for various operating subsidiaries in the production and sale of palm oil and other sustainable food crops, as well as renewable energy.

 

First Resources noted that the proposed acquisition presents an opportunity for the group to expand its upstream oil palm plantation footprint and enhance feedstock availability for its growing downstream operations.

 

It will be funded by financing arrangements which the group will enter into with third parties.

 

Following the acquisition, the group&rsquo s planted area will increase by about 25 per cent, and its crop yield will also rise by 25 per cent to 1.25 million tonnes.

 

This increase will enhance the certainty and reliability of feedstock supply to the group&rsquo s 1.35 million tonnes of refining and processing capacity, further solidifying its position as an integrated palm oil player, it added.

 

The proposed acquisition aligns with the group&rsquo s long-term strategy to be an integrated plantation player with processing capabilities that add value to its upstream produce, ensuring sustainable growth and profitability.

 

Upon completion of the proposed acquisition, Ciliandra Perkasa will be obliged to conduct a mandatory tender offer to purchase the remaining 296.2 million shares, or about 8.8 per cent of the issued and paid-up capital of the target company.

 

The offer price per remaining share is the higher of the average of the highest daily trading price of the shares of Austindo Nusantara Jaya on IDX during the 90 days prior to the acquisition announcement, or the acquisition price paid by Ciliandra Perkasa.

Maybank and RHB suggest an optimistic outlook for the palm oil company

 

MAYBANK and RHB on Monday (Mar 3) upgraded palm oil player First Resources to &ldquo buy&rdquo , on the back of stronger-than-expected profits logged for FY2024 ended December.

 

Analysts also pointed to an optimistic outlook for First Resources in FY2025, driven by increased production, lower costs, and improved downstream performance.

 

Maybank upgraded the counter to &ldquo buy&rdquo from &ldquo hold&rdquo , and raised its target price to S$1.69 from S$1.60 previously.

 

Similarly, RHB upgraded First Resources to &ldquo buy&rdquo from &ldquo neutral&rdquo , and raised its target price to S$1.85 from S$1.65 previously.

 

As at 4 pm on Monday, shares of First Resources were up 8.9 per cent or S$0.13 at S$1.59.

 

Maybank analyst Ong Chee Ting noted that FR&rsquo s profits after tax and minority interests beat street estimates, due to higher average selling prices and lower production costs.

 

On Feb 28, First Resources posted earnings of US$258.1 million for the full year ended Dec 31, 2024, up 69.1 per cent from US$145.4 million the year before.

 

Ong added: &ldquo Had it not been a net inventory build-up of 78,000 tonnes, (stemming from lower sales due to deferred delivery), earnings would have been even better.&rdquo

 

He noted that FR&rsquo s plantation segment saw earnings before interest, taxes, depreciation, and amortisation (Ebitda) of US$243.1 million for the second half-year, marking a 41 per cent year-on-year increase. This was driven by higher crude palm oil (CPO) prices and an increase in fresh fruit branch output.

 

Meanwhile, its downstream segment made a turnaround, achieving a positive Ebitda of US$9.8 million in H2 FY2024 with a 2 per cent margin &ndash compared with an Ebitda loss of US$16.6 million the previous year.

 

Following FY2024&rsquo s good performance, Maybank has raised FR&rsquo s earnings forecasts for FY2025 by 4 per cent and for FY2026 by 3 per cent.

 

RHB was more bullish. Following First Resources&rsquo s FY2024 earnings briefing, the brokerage increased its earnings forecasts for FY2025 and FY2026 by 14.7 per cent and 7 per cent, respectively, &ldquo after imputing lower unit costs and higher downstream utilisation&rdquo .

 

RHB&rsquo s Singapore research team noted that the counter is trading at an attractive 7.2 times price-to-earnings ratio based on its FY2025 forecast &ndash at the lower end of its peer range of seven to 11 times.

 

For FY2024, First Resources&rsquo s total revenue grew by 5.9 per cent to US$1 billion, boosted by stronger market prices, with CPO prices rising 11.8 per cent to US$1,006 per tonne from US$900 per tonne in FY2023.

 

Supported by the higher sales, Ebitda surged 41.4 per cent to US$398.9 million, while underlying net profit expanded 56.1 per cent to US$228.8 million.

 

&ldquo Looking ahead, Indonesia&rsquo s expansion of its biodiesel mandate from B35 to B40 in 2025 is expected to tighten global palm oil supplies and support prices,&rdquo said Ciliandra Fangiono, First Resources&rsquo s chief executive officer.

 

He added that First Resources will continue to be alert to developments in the regulatory and macroeconomic environment, including geopolitical trade tensions and their potential impact on the market prices of palm and other competing oils.