First Resources' (SGX:EB5) Five-Year Earnings Growth Trails 12% YoY Shareholder Returns

In the dynamic world of investing, it's not uncommon to see discrepancies between a company's earnings growth and its shareholder returns. First Resources Limited (SGX:EB5) is a prime example of this phenomenon. Over the past five years, the company has managed to increase its earnings per share (EPS) by an average of 16% per year. However, despite this impressive growth, the share price has declined by 11%. This raises the question: why the disconnect between earnings growth and shareholder returns?

First Resources' earnings growth has been robust, with EPS increasing by 16% annually over the past five years. This growth is a testament to the company's operational efficiency and strategic initiatives. However, the share price has not kept pace with this growth, declining by 11% over the same period. This discrepancy suggests that the market's valuation of the stock has not aligned with the company's earnings performance.

One possible explanation for this disconnect is market sentiment. Investors may have had overly optimistic expectations for First Resources, leading to a sell-off when these expectations were not met. The market might have been hoping for even higher growth rates or better performance metrics, resulting in a negative reaction despite the company's strong earnings growth.

Another factor to consider is the impact of dividends on total shareholder return (TSR). First Resources has a TSR of 13% over the last five years, which exceeds its share price return. This indicates that dividends have played a significant role in boosting the overall return for shareholders. The company's dividend per share has shown significant growth, with a 52.87% increase in 2024, followed by a 56.56% decrease in 2023, a 129.59% increase in 2022, a 107.52% increase in 2021, and a 29.90% increase in 2020. This volatility in dividend growth suggests that the company has been actively managing its dividend policy to reward shareholders, despite fluctuations in earnings.



Comparing First Resources to its peers in the food products industry, such as Sime Darby Plantation, AAK AB, IOI Corporation, United Plantations, Golden Agri-Resources Ltd, and Bumitama Agri Ltd, we can see varying levels of performance. For instance, Sime Darby Plantation has shown a 34.04% increase over three years, while AAK AB has seen a 68.64% increase. United Plantations has the highest three-year change at 126.22%. These figures suggest that while First Resources has a respectable TSR, some of its peers have outperformed it significantly in terms of share price appreciation.

The dividend yield for First Resources is estimated to be 6.01% for 2024 and 6.36% for 2025. This yield is relatively high compared to some of its peers, indicating that First Resources may be perceived as a stable income stock. However, the high dividend yield could also suggest that the market has concerns about the company's future growth prospects, leading to a lower share price and a higher yield.

In terms of valuation, First Resources has a P/E ratio of 8.68x for 2024 and 8.74x for 2025. This is relatively low compared to some of its peers, which could indicate that the market perceives First Resources as undervalued. However, the low P/E ratio could also be a result of the company's recent underperformance in share price.



In conclusion, First Resources' dividend policy and TSR suggest that the company is focused on rewarding shareholders through dividends, despite fluctuations in earnings. The high dividend yield and low P/E ratio indicate that the market may perceive the company as undervalued, but the significant outperformance of some peers suggests that there may be concerns about First Resources' future growth prospects. Investors should consider these factors when evaluating the company's valuation and market perception.