17 March 2015 | Corporate Update
TSH Resources
Continued focus on Indonesian estates
INVESTMENT HIGHLIGHTS
• TSH is banking in on its younger estate profile to drive up
future production growth post FY15.
Maintain NEUTRAL
Unchanged Target Price (TP): RM2.16
RETURN STATS
•
FY15 remains challenging for oil palm plantation companies.
Price (16 Mar 2015)
RM2.25
•
Expect muted FFB yield and production growth in FY15.
Target Price
RM2.16
•
TSH’s focus will still be on expansion and acquisition
especially in Indonesia.
Expected Share Price
Return
-4.00%
•
Maintain NEUTRAL with unchanged TP of RM2.16 per share.
Expected Dividend Yield
+1.78%
Expected Total Return
-2.22%
Key takeaways from management meeting:
Banking in on its younger estate profile. Out of the 41,301ha of
TSH’s planted area, 69% consists of younger trees that could drive up
production growth moving forward. Figure 1 (next page) shows the
breakdown of age profile from TSH’s planted area while Figure 2
exhibits TSH’s total landbank. Out of the company’s 67,853ha
unplanted areas, it is expecting nearly 5,000ha of new planting this
year, of which 40% will be planted with their Wakuba oil palm ramets.
STOCK INFO
Syariah Compliant
Yes
FFB production growth and yield to experience temporary
slowdown. We are expecting a slower growth in FFB production and
depressed FFB yields in FY15. These are due to the tree stress effect
after bumper crops during the past few years as well as the delayed
impact of adverse weather conditions (i.e. general drought which hit
Indonesia and Malaysia last year). However, yields and productions are
expected to pick up post FY15 considering more areas will come into
prime maturity and peak yield age. TSH’s FFB yield from their fully
matured areas has usually been above the industry average.
Issued shares (mil)
1,355.7
Continued focus on new planting programme in Indonesia estates.
The majority of TSH’s estates are in Indonesia. Hence its Management
has guided that their focus will continue to be on new planting
programme in Indonesia, especially in Kalimantan, where soils are
more fertile for oil palm planting. However, we caution that heavy
dependence on Indonesia for its growth will continue to subject the
company to regulatory and foreign currency risks. TSH’s most recent
acquisitions have further increased their plantation areas in Sabah and
Kalimantan, Indonesia by 5,000ha and 9,000ha respectively.
3-mth Avg Daily Value
Maintain NEUTRAL. We are maintaining our NEUTRAL call on TSH
Resources with an unchanged target price of RM2.16 per share. Our
target price is derived from PER15 of 20x, higher as compared to the
PE multiple of its peers - 18x for Sarawak Oil Palms, 15x for Boustead
Plantations and Hap Seng Plantations. The higher PE multiple is to
reflect its comparatively higher-than-industry-average FFB and CPO
production growth.
KLCI
1780.54
Bursa / Bloomberg
9059/
TSH MK
Board / Sector
Par Value (RM)
Market cap. (RM’m)
Price over NA
Main/ Plantation
0.50
3,050.4
2.68
52-wk price Range
RM2.05 – RM2.67
Beta (against KLCI)
0.90
3-mth Avg Daily Vol
0.43m
RM0.97m
Major Shareholders (%)
Tan Aik Pen
12.05
Tunas Lestari Sdn Bhd
6.31
Embun Yakin Sdn Bhd
5.58
Key terms:
CPO – Crude palm oil
FFB – Fresh fruit bunches
KINDLY REFER TO THE LAST PAGE OF THIS PUBLICATION FOR IMPORTANT DISCLOSURES
MIDF EQUITY BEAT
Tuesday, 17 March 2015
Figure 1: TSH Oil Palm Age Profile
Source: Company, MIDFR
Figure 2: TSH Oil Palm Landbank
Source: Company, MIDFR
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MIDF EQUITY BEAT
Tuesday, 17 March 2015
FINANCIAL SUMMARY
FYE 31 Dec
FY12
FY13
FY14
FY15F
FY16F
Revenue (RM’m)
984.76
1,017.84
1,079.91
1,185.31
1,335.92
EBIT (RM’m)
99.21
158.20
187.52
193.44
218.02
Pre-tax Profit (RM’m)
100.00
164.49
170.78
201.18
226.74
Net Profit (RM’m)
77.03
150.96
125.49
146.66
165.30
EPS (sen)
5.68
11.14
9.33
10.82
12.19
EPS growth (%)
-34.97
95.99
-16.21
15.95
12.71
PER (x)
39.60
20.21
24.12
20.80
18.45
Dividend / share(sen)
2.50
3.50
3.00
4.00
6.50
Dividend Yield (%)
1.11
1.56
1.33
1.78
2.89
DAILY PRICE CHART
Source: Bloomberg
Nadia Kamil |
Norliyana Alia Ahmad Fuad
[email protected]
03-2173 8461
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MIDF EQUITY BEAT
Tuesday, 17 March 2015
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MIDF AMANAH INVESTMENT BANK : GUIDE TO RECOMMENDATIONS
STOCK RECOMMENDATIONS
BUY
TRADING BUY
NEUTRAL
SELL
TRADING SELL
Total return is expected to be >15% over the next 12 months.
Stock price is expected to rise by >15% within 3-months after a Trading Buy rating has been
assigned due to positive newsflow.
Total return is expected to be between -15% and +15% over the next 12 months.
Total return is expected to be <15% over the next 12 months.
Stock price is expected to fall by >15% within 3-months after a Trading Sell rating has been
assigned due to negative newsflow.
SECTOR RECOMMENDATIONS
POSITIVE
The sector is expected to outperform the overall market over the next 12 months.
NEUTRAL
The sector is to perform in line with the overall market over the next 12 months.
NEGATIVE
The sector is expected to underperform the overall market over the next 12 months.
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