MENU

An Investor’s Overview Of First Resources Ltd’s Growth, Dividend, and Valuation

Credit: Simon Cunningham

First Resources Ltd (SGX: EB5) is one of the palm oil producers listed in Singapore’s stock market.

In late 2014, my colleague Chong Ser Jing had singled out the company as the only palm oil company in our local market that met the two criteria: (1) positive and consistently growing operating cash flow from 2007 to 2013, with only one year of decline allowed; and (2) a ratio of cash to total borrowings of no less than 50% in each of those six years.

I thought it’d be interesting as well to have a look at other important aspects about First Resources’ business that may interest investors, namely, its growth, dividend, and valuation.

1. Growth

The table below illustrates First Resources’ revenue and earnings per share over its last five fiscal years:

first-resources-revenue-and-profit-table
Source: S&P Global Market Intelligence

We can see that the company’s top-line and bottom-line were both growing from 2011 to 2013, but then started declining in 2014 onward.

2. Dividend

At First Resources’ current share price of S$1.97, it has a dividend yield of 0.96% thanks to its trailing dividend of 1.875 Singapore cents per share. The palm oil company’s yield is actually lower than the market average of 3.2%.

The market average is represented by the SPDR STI ETF (SGX: ES3), which is an exchange-traded fund tracking Singapore’s market barometer, the Straits Times Index (SGX: ^STI).

We can also try and assess the sustainability of the company’s dividend by looking at two financial ratios: the debt-to-shareholders’ equity ratio and the pay-out ratio. But, do bear in mind that there are many other things to look at beyond the two ratios.

The debt-to-shareholders’ equity ratio is a gauge for the level of financial risk a company is taking on. Meanwhile, the pay-out ratio is the percentage of a company’s profit that is paid out as a dividend. Generally speaking, the lower the two ratios are, the better it could be.

Coming back to First Resources, it has trailing earnings of 8.39 Singapore cents per share, which give rise to a pay-out ratio of 22%. Meanwhile, it has a debto-to-shareholders’ equity ratio of 57% (as of 30 September 2016).

3. Value

We’ve already seen First Resources’ earnings per share and share price. Putting the two numbers together gives us the company’s price-to-earnings ratio of 23.4. The company also has a price-to-book ratio of around 2.8 right now.

Both figures are actually higher than the corresponding numbers from the SPDR STI ETF. The ETF has a PE and PB ratio of 12 and 1.2, respectively.

At this point, it’s worth highlighting that whatever we’ve seen with First Resources here, though insightful, should only be used as a starting point for further investing research. More work needs to be done before any investing conclusion can be reached with First Resources.

If you like what you've seen, you can get even more investing insights and analyses from The Motley Fool's weekly investing newsletter Take Stock Singapore. It's FREE, so do check it out here.

Also, like us on Facebook to follow our latest news and articles. The Motley Fool's purpose is to help the world invest, better.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.