We maintain SELL on TSH Resources with an unchanged fair value of RM1.06/share. Our fair value for TSH is based on a FY20F PE of 25x.
TSH’s FY19 core net profit of RM39.2mil (ex-forex gain of RM4.8mil) results were 11.4% below our earnings forecast but within consensus estimates. TSH has declared a gross DPS of 1 sen for FY19.
TSH’s core net profit was lower in 4QFY19 compared with 3QFY19 due to weak earnings from the associates and the “others” division. Share of earnings in the TSH/Wilmar palm refinery swung to a negative RM1.3mil in 4QFY19 from RM6.8mil in 3QFY19. TSH also recorded a fair value loss of RM4.7mil on commodity futures contracts in 4QFY19.
Disregarding the associates, TSH’s gross profit rose by 34.1% QoQ to RM34.5mil in 4QFY19 on the back of higher palm product prices.
TSH’s average CPO price realised climbed by 18.1% to RM2,250/tonne in 4QFY19 from RM1,905/tonne in 3QFY19. TSH’s FFB production slid by 2.8% QoQ in 4QFY19.
The “Others” division (mainly cocoa and biomass activities) recorded a smaller EBIT of RM4.5mil in 4QFY19 vs. RM6.5mil in 3QFY19. EBIT margin eased to 15.8% in 4QFY19 from 21.7% in 3QFY19 due to higher operating expenses.
Comparing FY19 against FY18, TSH’s core net profit (exforex changes) plunged by 21.9% to RM39.2mil from RM50.2mil dragged by weak palm product prices. CPO prices started recovering only in 4QFY19.
Included in TSH’s FY19 core net profit was insurance claims of RM41.7mil and write-offs of assets of RM25.5mil in respect of a fire at the wood flooring plant in Gopeng in February 2019.
TSH’s average CPO price was RM1,995/tonne in FY19 vs. RM2,086/tonne in FY18. FFB production growth was 4.2% in FY19.
Share of net profit in the TSH/Wilmar palm refinery climbed to RM17.2mil in FY19 from RM5.0mil in FY18 underpinned by timely purchases of feedstock in 9MFY19.
TSH’s net gearing stood at 90.8% as at end-Dec 2019 vs. 98.2% as at end-Dec 2018. TSH reduced its capex by RM46.6mil in FY19 and repaid about RM12.4mil worth of borrowings (after deducting drawdowns). About 30.7% of TSH’s gross borrowings of RM1.4bil were denominated in foreign currencies as at end-Dec 2019.
New IPO: Building management systems (BMS), solar thermal systems and energy-saving services provider, Solar District Cooling Bhd aims to list on the Ace Market!
MQ Trader 881 views | 5 d ago
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New IPO: The onshore and offshore support services provider for the O&G industry, Steel Hawk Bhd aims to list on the Ace Market!
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....