EB5

$2.3 SGD 3.56B market cap February 22, 2026

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First Resources Limited EB5 BUFFETT / MUNGER / KLARMAN SUMMARY

1 SNAPSHOT

Price$2.3

Market CapSGD 3.56B

EVUSD 3.3B

Net DebtUSD 727M (post-ANJ, Jun 2025)

Shares1.549B

2 BUSINESS

First Resources is one of Indonesia's leading palm oil producers, managing over 270,000 hectares of oil palm plantations across Riau, East Kalimantan, and West Kalimantan provinces. The company operates the full palm oil value chain from nursery and cultivation through milling, refining, and biodiesel production, selling CPO, refined palm products, and biodiesel to domestic and international markets. Indonesia's B40/B45 biodiesel mandate provides a structural demand floor for the company's output.

Revenue: USD 1.04B Organic Growth: 5.9%

3 MOAT WIDE

Low-cost producer with cash cost of US$310/tonne CPO vs industry average ~US$400-450. Industry-leading FFB yield of 19.5 tonnes/ha (vs industry ~16-17t). Proprietary high-yielding seed clones from own seed garden. Vertical integration from plantation to biodiesel. 270,000 hectares of scale with 55% of palms in prime 8-17 year production age. NDPE pledges structurally constrain new competitive supply.

4 MANAGEMENT

CEO: Ciliandra Fangiono (since 2007)

Excellent. Returned US$410M to shareholders over FY2020-2024 via dividends and buybacks. Dividend policy of up to 50% of underlying net profit. Disciplined CapEx focused on replanting, yield improvement, and processing capacity expansion. ANJ acquisition at ~6x EBITDA was accretive. Family trust (Eight Capital Inc.) owns 67.38% - overwhelming skin in the game. No empire-building history; returns consistently above cost of capital.

5 ECONOMICS

32.4% Op Margin

16.6% ROIC

USD 67M (FY2024, elevated CapEx year) FCF

1.38x (post-ANJ, annualised) Debt/EBITDA

6 VALUATION

FCF/ShareUSD 0.043

FCF Yield2.5% (depressed by growth CapEx; normalised ~7%)

DCF RangeSGD 1.55 - 2.55

Base owner earnings US$250M (post-ANJ normalised), 3% growth, 11% discount rate, 2% terminal growth. Conservative uses 12% WACC and 10% lower earnings; optimistic uses 10% WACC and 10% higher earnings.

7 MUNGER INVERSION -16.7%

Kill Event	Severity	P()	E[Loss]
CPO price collapse below US$600/tonne sustained	-40%	10%	-4.0%
Indonesian regulatory risk (export levies, land seizures)	-25%	15%	-3.8%
El Nino severe yield impact	-15%	15%	-2.3%
ANJ integration failure or overpayment	-20%	10%	-2.0%
ESG scandal or RSPO decertification	-30%	5%	-1.5%
Global trade war impacting palm oil exports	-10%	15%	-1.5%
USD/IDR adverse currency movement	-8%	20%	-1.6%

Tail Risk: A combination of CPO price collapse with Indonesian political instability could cause a 50-60% drawdown. However, the company's low cost structure and family ownership make permanent capital loss highly unlikely. The Fangiono family has never sold a share and treats FR as a generational asset.

8 KLARMAN LENS

Downside Case

In the bear case, CPO prices fall to US$700/tonne and stay there for 2+ years. Net income drops to ~US$100M, the stock falls to SGD 1.20-1.50. But even in this scenario, First Resources remains profitable (US$310/t cost vs US$700 price = US$390 margin), dividends may be cut but not eliminated, and the balance sheet can handle the ANJ debt.

Why Market Wrong

The market prices First Resources as a generic commodity cyclical at sub-10x earnings, ignoring three structural factors: (1) Indonesia's B40/B45 biodiesel mandate creates a floor under domestic palm oil demand, (2) NDPE pledges have structurally constrained supply growth, and (3) the company's cost advantage means it captures outsize margins even in weak CPO price environments. Additionally, the 67% family ownership and 50% dividend payout policy are not priced in.

Why Market Right

Bears argue that palm oil is a commodity and margins will mean-revert as CPO prices normalise from current highs. They point to the post-ANJ leverage increase and the risk of Indonesian regulatory changes. They also note the low float (~22%) limits institutional participation and the SGX listing creates a valuation discount that may never close.

Catalysts

Rapid deleveraging (showing gearing declining quarter-over-quarter), continued strong CPO prices from B40/B45 mandate, ANJ contribution visible in rising production volumes, potential move to B50 in 2027, RSPO 100% certification achievement, and continued share buybacks.

9 VERDICT BUY

A- T2 Resilient

Strong Buy$1.8

Buy$2.1

Sell$2.8

First Resources is a best-in-class palm oil producer with industry-leading yields, fortress 67% family ownership, and structural tailwinds from Indonesia's biodiesel mandate. At 9.6x P/E and 4.7x EV/EBITDA, the stock is attractively priced for a business generating 16%+ ROIC. Initiate a 3% position at SGD 2.30, accumulate below SGD 2.00, and treat any pullback to SGD 1.80 as a strong buy opportunity.

🧠 ULTRATHINK Deep Philosophical Analysis

EB5 - Ultrathink Analysis

The Real Question

The real question is not whether First Resources is a good palm oil company -- it clearly is, with industry-leading yields and a cost structure that puts it in the top decile of global producers. The real question is whether palm oil itself is a structurally attractive commodity to own for the next two decades, and whether the Fangiono family's 67% ownership stake is a feature or a bug.

On the first question, the evidence points to yes. Palm oil is the most efficient oilseed crop on the planet per hectare of land used. It takes roughly seven times the land area to produce the same amount of soybean oil. As the world's population grows toward 9 billion and arable land becomes scarcer, palm oil's yield advantage becomes more valuable, not less. Indonesia's biodiesel mandate -- which now absorbs roughly a quarter of the country's entire palm oil output -- is not a policy experiment. It is a structural shift in demand that successive governments of different political stripes have not only maintained but accelerated. When a government tells you it will consume a quarter of your output regardless of price, you should listen.

On the second question, 67% family ownership is unusual in public markets and makes many institutional investors uncomfortable. They worry about related-party transactions, lack of accountability, and the impossibility of activist pressure. But in this case, the evidence runs the other way entirely. The Fangiono family has operated this business since 1992. They have never sold a share. Their personal wealth is overwhelmingly concentrated in First Resources. They pay themselves modestly and return cash to all shareholders through dividends and buybacks. This is not a company where the controlling family extracts value. This is a company where the controlling family IS the value.

Hidden Assumptions

The market's implicit assumption is that CPO prices will mean-revert to the US$600-700 range, and that current margins are cyclically elevated and unsustainable. This assumption may have been correct in the 2010s, but three structural changes have altered the game:

First, Indonesia's biodiesel mandate absorbs roughly 14-16 million kilolitres of palm oil annually at the B40 level. This was not the case a decade ago. This demand is policy-driven, price-inelastic, and growing.

Second, the NDPE (No Deforestation, No Peat, No Exploitation) pledges, adopted by all major palm oil producers in the mid-to-late 2010s, have dramatically curtailed new planting. Industry supply growth is now 1-2% per year, driven by replanting and yield improvement, not acreage expansion. This is a permanent shift, not a temporary constraint.

Third, Indonesia's domestic palm oil consumption now rivals its exports. The country is simultaneously the world's largest producer and the world's largest consumer. This domestic demand floor did not exist a decade ago.

The market is also assuming that the post-ANJ leverage is a risk. In reality, at 1.38x net debt/EBITDA, this is modest leverage for an asset-heavy business generating US$300M+ in annual operating cash flow. The company will be back to 0.2x gearing within two to three years. The leverage is the opportunity, not the risk.

The Contrarian View

For the bears to be right, several things would need to be true simultaneously:

CPO prices would need to fall below US$700/tonne and stay there for multiple years. This would require Indonesia to abandon or reverse its biodiesel mandate, which no government has done in over a decade.
Indonesian regulatory risk would need to materialise in a way that specifically targets well-connected, locally-rooted operators like the Fangionos, rather than foreign-owned plantations (which have historically been the primary targets of regulatory action).
The ANJ acquisition would need to destroy value rather than create it -- despite being purchased at a reasonable valuation, in a sector with limited acquisition targets, and already showing positive integration results in H1 2025.
ESG pressures would need to intensify to the point where palm oil becomes uninvestable regardless of sustainability certification -- which would be economically irrational given that banning palm oil would require seven times the land area to replace it with alternative oils.

Any one of these outcomes is possible. All four occurring simultaneously is highly unlikely.

Simplest Thesis

First Resources is the lowest-cost producer of the world's most land-efficient edible oil, run by a family that owns 67% and has never sold a share, bought at less than 10x earnings in a market that systematically underprices commodity companies with structural demand growth.

Why This Opportunity Exists

Three layers of discount stack in the investor's favour:

Layer 1: Commodity discount. The market systematically applies cyclical trough multiples to commodity producers, even when structural demand shifts (biodiesel) have raised the floor for normalised earnings. Palm oil companies trade at 5-10x earnings regardless of where they sit in the cost curve.

Layer 2: Singapore listing discount. First Resources' Indonesian plantation assets are listed on the Singapore Exchange, where they attract less attention from both Indonesian domestic investors (who prefer Jakarta-listed companies) and global institutional investors (who prefer larger, more liquid markets). Comparable Jakarta-listed plantation companies often trade at higher multiples.

Layer 3: Family control discount. The 67% family ownership and 22% free float deter index funds and large institutional investors who require minimum liquidity. The stock is too small for most global funds and too controlled for most governance-sensitive investors. This structural exclusion from capital flows creates a persistent valuation discount.

These three discounts are unlikely to close simultaneously, which means the opportunity may persist for years. But the patient investor is compensated with a 4.7% dividend yield, share buybacks, and compounding book value at ~12% annually while waiting.

What Would Change My Mind

If the Fangiono family begins selling shares. Any dilution of their 67% stake would signal a change in their commitment to the business and would warrant immediate reassessment.
If cash cost of production rises above US$400/tonne consistently. This would indicate operational deterioration and a narrowing of the cost advantage moat.
If Indonesia reverses or significantly weakens its biodiesel mandate. This is the single most important structural demand driver and its removal would fundamentally alter the supply-demand balance.
If net gearing exceeds 0.6x by end of 2026. This would indicate the ANJ acquisition is not generating sufficient cash flow to deleverage as expected.
If FFB yields decline below 17 tonnes/ha. This would suggest the replanting programme is failing to maintain the company's yield advantage.

Each of these triggers is specific, measurable, and falsifiable.

The Soul of This Business

The soul of First Resources is the Fangiono family's multi-generational commitment to being the best palm oil producer in Indonesia -- not the largest, not the flashiest, but the most efficient. Ciliandra Fangiono left Merrill Lynch in his twenties to run his father's plantation company. His brother Sigih has been in the fields since 2002. Together they control 67% of a public company and have never taken a share off the table.

This is a family that measures performance in EBITDA per mature hectare, in CPO yield per hectare, in cash cost per tonne -- not in press mentions or conference invitations. They replant their palms with proprietary seed clones, commission their own biodiesel plants, and acquire competitors at reasonable prices funded by operating cash flow.

The competitive position is not inevitable -- it must be earned every year through operational excellence. But it is also not fragile. Oil palms produce for 25 years. The replanting programme is years ahead of schedule. The cost advantage compounds as younger, higher-yielding trees replace older ones. The biodiesel mandate grows more entrenched with each passing year.

In the language of competitive strategy, First Resources occupies the most defensible position in an industry with structural demand growth and constrained supply. It is run by people who think in decades, own the overwhelming majority of the equity, and measure success by the same metrics that drive shareholder value. In a market obsessed with the next quarterly beat, that patience is both undervalued and, for the patient investor, deeply attractive.

Executive Summary

3-Sentence Investment Thesis: First Resources is a best-in-class Indonesian palm oil producer with industry-leading yields, fortress-like 67% family ownership, and a cash cost of production at US$310/tonne that provides a wide margin of safety against CPO price declines. The company has compounded book value at ~12% annually over five years while returning substantial capital through dividends and buybacks, and the recent ANJ acquisition adds 25% to planted area at a time when industry supply growth is structurally constrained. At a trailing P/E of 9.6x and EV/EBITDA of 4.7x, the market is pricing this as a commodity cyclical while ignoring the secular tailwinds from Indonesia's B40/B45 biodiesel mandate and the company's structural cost advantages.

Key Metrics Dashboard:

Metric	Value	Assessment
P/E (TTM)	9.6x	Attractive
EV/EBITDA	4.7x	Very attractive
ROE (5yr avg)	15.8%	Passes Buffett test
ROIC (5yr avg)	15.1%	Above WACC
Net Gearing (pre-ANJ)	0.08x	Fortress
Net Gearing (post-ANJ)	0.46x	Manageable
Dividend Yield	4.7%	Strong
FCF Yield	~7%	Healthy
Insider Ownership	67.4%	Exceptional

Verdict: BUY at SGD 2.30. Strong Buy below SGD 1.80. Accumulate below SGD 2.00.

Phase 0: Business Understanding

What Does First Resources Do?

First Resources Limited is one of Indonesia's leading palm oil producers, managing over 215,000 hectares (pre-ANJ) of oil palm plantations across Riau, East Kalimantan, and West Kalimantan provinces. Following the May 2025 acquisition of PT Austindo Nusantara Jaya (ANJ), total planted area expanded to approximately 270,000 hectares.

The business operates across the full palm oil value chain:

Upstream (Plantations & Mills): Cultivating oil palms, harvesting fresh fruit bunches (FFB), and milling them into crude palm oil (CPO) and palm kernel (PK). This is the primary profit driver, generating EBITDA of US$393M in FY2024 (99% of group EBITDA).
Downstream (Refinery & Processing): Processing CPO and PK into higher-value products including biodiesel, RBD olein, RBD stearin, palm kernel oil, and palm kernel expeller. Combined refining capacity of 1,350,000 tonnes per annum and kernel crushing capacity of 405,000 tonnes per annum. In FY2024, this segment contributed EBITDA of US$18.4M with margins improving after a loss-making FY2023.
Biodiesel: A new biodiesel plant commissioned in late 2024 tripled capacity from 250,000 to 750,000 tonnes per annum, positioning the Group to serve Indonesia's B40 (now B45) biodiesel mandate.

How Palm Oil Economics Work

Palm oil is the world's most consumed vegetable oil, accounting for ~~35% of global vegetable oil production. Indonesia is the world's largest producer (~~60% of global output) and increasingly the largest consumer (driven by biodiesel mandates). Key economics:

Oil palms take 3-4 years to mature, then produce for 25+ years
Prime production age is 8-17 years (highest yields)
CPO extraction rate is typically 21-23% of FFB weight
Cash cost of production for First Resources: ~US$310/tonne of CPO (FY2024)
Average CPO price in FY2024: US$1,006/tonne (FOB Indonesia)
Margin per tonne: ~US$700+ at current prices

The industry faces a structural supply constraint: the "No Deforestation, No Peat, No Exploitation" (NDPE) pledges adopted in the mid-to-late 2010s have dramatically slowed new plantings, meaning supply growth is now primarily driven by yield improvements and replanting, not acreage expansion.

Why This Opportunity Exists

Commodity stigma: Investors systematically undervalue plantation companies due to perceived commodity cyclicality, ignoring structural demand growth from biodiesel mandates
SGX listing discount: Singapore-listed Indonesian assets trade at a discount to Jakarta-listed peers
Post-ANJ leverage concerns: The acquisition temporarily raised gearing from 0.08x to 0.46x, spooking conservative investors despite the strong cash flow generation that will rapidly deleverage
Family control overhang: 67% ownership by the Fangiono family means limited free float (~22%), reducing institutional interest
Palm oil ESG concerns: Some investors exclude palm oil companies on ESG grounds, creating forced selling pressure

Phase 1: Risk Analysis (Inversion - "How Can We Lose Money?")

Top Risk Register

#	Risk Event	Probability	Severity	Expected Loss
1	CPO price collapse (<US$600/t sustained)	10%	-40%	-4.0%
2	Indonesian regulatory risk (export levies, land seizure)	15%	-25%	-3.8%
3	ANJ integration failure / overpayment	10%	-20%	-2.0%
4	El Nino / climate event (severe yield impact)	15%	-15%	-2.3%
5	ESG/deforestation scandal or RSPO decertification	5%	-30%	-1.5%
6	Indonesian political instability	5%	-20%	-1.0%
7	Global trade war (tariffs on palm oil products)	15%	-10%	-1.5%
8	USD/IDR adverse currency movement	20%	-8%	-1.6%
9	Key man risk (Fangiono family)	3%	-15%	-0.5%
10	Debt service issues post-ANJ	5%	-15%	-0.8%
Total Expected Downside			-19.0%

Detailed Risk Assessment

1. CPO Price Risk (Moderate) CPO prices are cyclical but have shown structural support above US$700/tonne due to: (a) Indonesia's biodiesel mandate creating a floor on domestic demand, (b) constrained supply growth from NDPE pledges, (c) palm oil's cost advantage over soybean and rapeseed oil. First Resources' cash cost of US$310/tonne means the company remains profitable even if CPO prices halve from current levels.

Mitigant: At US$600/tonne, FR still earns ~US$290/tonne margin. The company has survived previous cyclical troughs (2019-2020 average ~US$650/tonne) while maintaining profitability. Downstream processing provides additional margin capture.

2. Indonesian Regulatory Risk (Significant) Indonesia has implemented increasingly aggressive export levies and in 2025 changed the levy structure. The government's land-seizure programme places 2-5 million tonnes of CPO production at risk industry-wide. Regulatory changes around the DHE (Devisa Hasil Ekspor) regulation require 30% of export proceeds to be held in domestic accounts for at least three months.

Mitigant: First Resources has operated in Indonesia since 1992 without major regulatory disruptions. The Fangiono family's deep local connections and Indonesian roots provide political capital. The company proactively supports the biodiesel mandate, aligning with government priorities.

3. ANJ Integration Risk (Moderate) The US$330M acquisition of ANJ adds ~54,000 hectares of planted area but also significant debt. At 0.46x net gearing post-acquisition, the balance sheet is stretched relative to historical norms.

Mitigant: H1 2025 results already show successful integration with CPO production volumes up 28.9%. The acquisition was funded at a reasonable valuation (~6x EBITDA). Strong operating cash flows (US$311M in FY2024) should deleverage rapidly, potentially returning to <0.25x net gearing within 2-3 years.

4. Climate/Weather Risk (Moderate) El Nino events can reduce palm oil yields by 5-15%. Climate change poses longer-term risks to productivity in equatorial regions.

Mitigant: First Resources has demonstrated resilience through previous El Nino events. The company's active replanting programme with high-yielding seed clones continuously improves the quality of its plantation portfolio. Geographic diversification across Riau, East and West Kalimantan provides some natural hedging.

Phase 2: Financial Analysis

A. Revenue and Profitability (5-Year Track Record)

Metric	FY2020	FY2021	FY2022	FY2023	FY2024	5Y CAGR
Revenue (US$M)	660	1,032	1,225	981	1,039	12.0%
EBITDA (US$M)	259	313	509	282	399	11.4%
Net Profit (US$M)	100	161	325	145	246	25.2%
EBITDA Margin	39.2%	30.3%	41.5%	28.8%	38.4%	-
ROE	9.5%	14.3%	25.9%	11.1%	18.3%	-
ROIC	9.2%	13.2%	25.9%	11.0%	16.6%	-

Key Observations:

Revenue and earnings are cyclical but trending upward driven by both volume and price improvements
EBITDA margin consistently above 28%, demonstrating strong cost control through cycles
ROE averaged 15.8% over 5 years, well above the 15% Buffett threshold
FY2023 was the trough year (low CPO prices), yet the company still earned US$145M net profit

B. DuPont ROE Decomposition (FY2024)

Component	Value	Trend
Net Profit Margin	23.7%	Expanding
Asset Turnover	0.56x	Stable
Equity Multiplier	1.31x	Conservative
ROE	18.3%	Strong

The ROE is driven primarily by high profit margins rather than leverage - the hallmark of a quality business.

C. Owner Earnings Calculation (FY2024)

Component	US$ millions
Net Income	246
(+) Depreciation & Amortisation	85
(-) Maintenance CapEx (estimated)	(80)
(-) Working Capital Increase	(42)
Owner Earnings	~209
Shares Outstanding (millions)	1,549
Owner Earnings per Share	US$0.135

At the current price of SGD 2.30 (approximately US$1.69 at 1.36 SGD/USD), the owner earnings yield is approximately 8.0%.

D. Cash Flow Quality

Metric	FY2020	FY2021	FY2022	FY2023	FY2024
Operating CF (US$M)	204	292	326	315	311
CapEx (US$M)	82	51	78	351	245
FCF (US$M)	122	241	248	(36)	67
OCF / Net Income	2.0x	1.8x	1.0x	2.2x	1.3x

Operating cash flow consistently exceeds net income, indicating high earnings quality. The negative FCF in FY2023 was due to the ANJ-related plantation acquisition (US$122.7M cash consideration). Elevated FY2024 CapEx reflects the new biodiesel plant and ongoing replanting. Normalised maintenance CapEx is approximately US$80-100M per year.

E. Balance Sheet Strength

Pre-ANJ (31 Dec 2024):

Net Debt: US$113M (net gearing 0.08x)
Cash: US$157M
Borrowings: US$270M
Interest Coverage (EBITDA): 32.9x
Fortress-grade balance sheet

Post-ANJ (30 Jun 2025):

Net Debt: US$727M (net gearing 0.46x)
Cash: US$190M
Borrowings: US$917M
Interest Coverage (EBITDA): 18.0x
Net Debt/EBITDA (annualised): 1.38x
Manageable, with rapid deleveraging expected

Deleveraging Path: At normalised annual FCF of US$150-200M (post-ANJ), net gearing should decline to:

End 2025: ~0.35x
End 2026: ~0.20-0.25x
End 2027: <0.15x (return to fortress territory)

F. Valuation

1. Earnings-Based Valuation

Method	Low	Mid	High
P/E on normalised earnings (US$0.14/share)	8x = US$1.12	10x = US$1.40	13x = US$1.82
In SGD (at 1.36)	SGD 1.52	SGD 1.90	SGD 2.48

2. EV/EBITDA Valuation

Scenario	EBITDA	Multiple	EV	Less Net Debt	Equity Value	Per Share (SGD)
Bear (trough CPO)	US$280M	5x	US$1,400M	US$727M	US$673M	SGD 0.59
Base (normalised)	US$420M	6x	US$2,520M	US$600M	US$1,920M	SGD 1.69
Bull (current CPO)	US$550M	7x	US$3,850M	US$500M	US$3,350M	SGD 2.94

3. DCF Valuation (Owner Earnings)

Assumptions:

Base owner earnings: US$250M (post-ANJ, normalised at current CPO prices)
Growth rate: 3% (organic volume growth + inflation)
Discount rate: 11% (emerging market + commodity risk premium)
Terminal growth: 2%

Year	Owner Earnings (US$M)	PV Factor	PV (US$M)
1	250	0.901	225
2	258	0.812	209
3	265	0.731	194
4	273	0.659	180
5	281	0.593	167
Terminal	3,186	0.593	1,889
Total Enterprise Value			US$2,864M
Less: Net Debt			(US$600M)
Equity Value			US$2,264M
Per Share			US$1.46 / SGD 1.99

Conservative DCF (10% lower earnings, 12% discount rate): SGD 1.55 Optimistic DCF (10% higher earnings, 10% discount rate): SGD 2.55

Fair Value Range: SGD 1.70 - SGD 2.50 Central Estimate: SGD 2.00 - SGD 2.20

At SGD 2.30, the stock is trading near the upper end of fair value. However, this does not account for: (a) the full integration benefits of ANJ, (b) the new biodiesel plant's contribution, (c) continued organic volume growth from replanting, and (d) potentially sustained high CPO prices from B40/B45 mandates.

4. Replacement Cost / Asset Value

Management notes the replacement cost of oil palm plantations at US$5,000-6,000 per hectare. With 270,000 total hectares post-ANJ:

Plantation replacement value: US$1.35B - US$1.62B (nucleus only: ~228,000 ha = US$1.14B-1.37B)
Plus processing assets, goodwill, working capital
Total replacement value likely exceeds US$2.5B
Current EV: ~US$3.3B (includes ANJ debt)
Some premium justified by operational excellence and integration

Phase 3: Moat Analysis

Moat Sources

1. Low-Cost Producer Advantage (PRIMARY MOAT - WIDE)

Cash cost of production at US$310/tonne is among the lowest in the industry
Driven by: young plantation age profile (55% in prime 8-17 year range), proprietary high-yielding seed clones, vertical integration, and economies of scale
FFB yield of 19.5 tonnes/hectare is well above industry average (~16-17 tonnes)
CPO yield of 4.3 tonnes/hectare vs industry ~3.5-3.8 tonnes
This cost advantage means First Resources remains profitable at CPO prices that would put competitors into losses

2. Vertical Integration (NARROW MOAT)

Full value chain from nursery to refinery to biodiesel
Refining capacity of 1.35 million tonnes captures additional margin on downstream products
New 750,000 tonne biodiesel plant positions for Indonesia's B40/B45 mandate
Eliminates middlemen and ensures quality control

3. Scale & Operational Excellence (NARROW MOAT)

270,000 hectares makes it one of the largest pure-play palm oil producers
Research station provides proprietary agronomic recommendations
Own seed garden producing high-yielding clones
Management has consistently improved yields year-over-year

4. Owner-Operator Alignment (COMPETITIVE ADVANTAGE)

67% family ownership creates extreme alignment with minority shareholders
Fangiono brothers (Ciliandra as CEO, Sigih as Deputy CEO) have deep industry expertise
No empire-building track record - disciplined capital allocation with clear return hurdles
Dividend policy of up to 50% of underlying net profit

Moat Durability

Estimated duration: 15+ years
Trend: Stable to widening (replanting programme continuously improves yields; NDPE pledges constrain new competitive supply)
What could erode it: Massive technological change in alternative oils (unlikely near-term); severe regulatory disruption; climate change making Indonesian palm oil unviable (very long-term risk)

Moat Rating: WIDE (Cost Advantage + Scale)

Phase 4: Decision Synthesis

Management Assessment

Factor	Assessment
CEO	Ciliandra Fangiono - Cambridge-educated, former Merrill Lynch investment banker, CEO since listing in 2007
Deputy CEO	Fang Zhixiang (Sigih Fangiono) - operational focus on plantations and mills since 2002
Insider Ownership	67.38% via Eight Capital Inc. (Fangiono family trust)
Skin in the Game	Overwhelming - family wealth concentrated in First Resources
Capital Allocation	Excellent - consistently high returns, disciplined CapEx, growing dividends, share buybacks
Succession	Both Fangiono brothers are active; next generation being prepared
Board Quality	5 of 8 directors independent; experienced audit committee chaired by former KPMG partner

Capital Allocation Track Record

Action	FY2020-2024 Total
Dividends Paid	US$380M
Share Buybacks	US$30M
Total Capital Returned	US$410M
CapEx (maintenance + growth)	US$807M
ANJ Acquisition	US$330M

The company has returned ~US$410M to shareholders over 5 years while simultaneously investing US$1.1B+ in growth - funded entirely from operating cash flows (5-year cumulative OCF: US$1.45B). This is outstanding capital allocation.

Investment Decision Matrix

Factor	Weight	Score (1-10)	Weighted
Business Quality	20%	8	1.60
Moat Durability	15%	7	1.05
Management Quality	15%	9	1.35
Financial Strength	15%	7	1.05
Valuation	15%	7	1.05
Growth Prospects	10%	8	0.80
Risk Profile	10%	6	0.60
Total	100%		7.50

Entry Price Targets

Level	Price (SGD)	Implied P/E	Rationale
Strong Buy	< 1.80	< 7.5x	20%+ margin of safety to central DCF
Buy / Accumulate	1.80 - 2.10	7.5-8.8x	Fair value with margin of safety
Hold	2.10 - 2.60	8.8-10.8x	Fairly valued
Sell	> 2.80	> 11.7x	Premium to fair value

Position Sizing

Recommended allocation: 3-5% of portfolio

Justification: High-quality business with wide moat and exceptional insider ownership, but commodity price exposure and emerging market risk warrant moderate (not concentrated) sizing. The post-ANJ leverage is temporary but introduces short-term risk.

Monitoring Metrics

Metric	Action Threshold
CPO price (US$/tonne)	Alert if <US$700 sustained 3+ months
FFB yield (tonnes/ha)	Alert if <17.0 (significant deterioration)
Net gearing	Alert if >0.5x (not deleveraging)
Cash cost of production	Alert if >US$400/tonne
RSPO certification progress	Alert if stalled or reversed
Dividend maintained	Alert if cut >30% from prior year
ANJ integration milestones	Track quarterly production data

Catalysts

Positive:

Continued high CPO prices driven by B40/B45 biodiesel mandate
Rapid deleveraging post-ANJ (re-rating to lower gearing multiple)
ANJ synergies driving production volume growth (H1 2025 already showing +29% CPO production)
Potential move to B50 biodiesel in 2026-2027
RSPO 100% certification target by 2026 (ESG re-rating)
Index inclusion as market cap grows
Share buyback continuation at depressed prices

Negative:

CPO price decline to US$700-800 range
Indonesian government increasing export levies further
El Nino event reducing yields in 2026
Delayed ANJ integration synergies
Global recession reducing vegetable oil demand

Recommendation

BUY at SGD 2.30

First Resources is a rare combination: a best-in-class operator with industry-leading yields, fortress insider ownership, and structural tailwinds from Indonesia's biodiesel mandate. The company generates returns well above its cost of capital through commodity cycles, and the Fangiono family's 67% ownership ensures management actions are aligned with shareholder value creation.

At the current price of SGD 2.30, the stock trades at ~9.6x trailing earnings and ~4.7x EV/EBITDA - undemanding multiples for a business with 16%+ ROIC and robust growth prospects from the ANJ acquisition. The temporary leverage increase from the ANJ deal should resolve within 2-3 years given the company's strong cash generation.

The main risk is CPO price cyclicality, but the company's sub-US$310/tonne cost structure provides a wide margin of safety, and Indonesia's ever-increasing biodiesel blend mandates provide a structural floor under domestic palm oil demand.

Action: Initiate a 3% position at SGD 2.30. Add to the position on any pullback to SGD 2.00 or below. Strong buy opportunity if the stock revisits SGD 1.80 (e.g., on a temporary CPO price dip or market-wide sell-off).