Investment Highlights

• We maintain HOLD on TSH Resources with an unchanged fair value of RM1.10/share, based on a FY24F PE of 15x, which is the 5-year average for small-cap planters. We ascribe a 3-star ESG rating to TSH.

• TSH has declared a final gross DPS of 2.5 sen for FY23 (FY22: 10.5 sen). We forecast a gross DPS of 3.0 sen for FY24F, which translates into a yield of 2.7%.

• TSH’s FY23 core net profit of RM72.5mil (ex-disposal gain of RM27.6mil and forex loss of RM5.1mil) was within our forecast but 20% below consensus.

• TSH’s core net profit fell by 62.6% to RM72.5mil in FY23, dragged by expenses in respect of its listing on the SGX, a higher effective tax rate, weaker palm product prices and increased costs of production.

• TSH incurred expenses of RM6.2mil for its secondary listing in Singapore. Also, the group’s effective tax rate rose to 36.4% in FY23 from 5.5% in FY22 due to higher non-tax deductible expenses.

• Average realised CPO price declined by 16.2% to RM3,437/tonne in FY23 from RM4,100/tonne in FY22. FFB production growth was unexciting at -2% in FY23.

• TSH recorded a share of net loss of RM3mil in the TSH/Wilmar palm refinery in FY23 compared to a profit of RM31.2mil in FY22. We attribute this to price competition from Indonesia.

• Indonesia’s CPO export tax and levy affected TSH’s revenue by a smaller RM107.8mil in FY23 vs. RM225.2mil in FY22 as the government reduced tax and levy rates last year.

• Losses of the “Others” division (biomass and wood flooring) widened to RM11.8mil in FY23 from RM3.4mil in FY22. Demand for wood flooring products in the US and Europe was poor last year as the housing industry was affected by high interest rates.

• TSH is currently trading at a pricey FY24F PE of 16x, which is higher than its 2-year average of 12x.

Source: AmInvest Research - 23 Feb 2024