• TSH Resources, PT Kawasan Industri Kalimantan Indonesia (KIKI) and PT Kalimantan Industrial Park Indonesia (KIPI) have agreed to terminate the disposal and acquisition of 5,398ha of land in Bulungan Regency, North Kalimantan. This is due to the non-fulfilment of certain terms and conditions.

• The proposed disposals of land were first announced in December 2021. TSH was supposed to sell 13,898ha of land in North Kalimantan to KIKI and KIPI for Rp2,428.9bil (RM731.1mil). This translates roughly into RM52,604/ha.

• To date, TSH has sold 60% of the land to the Indonesian government agencies and received cash of RM441.4mil (Rp1,466.6bil). TSH used most of the cash proceeds to pare down its borrowings.

• Due to the termination of the disposal, TSH will refund the down payments of Rp59.2bil (RM17.8mil) to KIKI and KIPI.

• Out of the 5,398ha of land, about 3,333ha have already been planted.

• We estimate that the 3,333ha of oil palm estates would improve TSH’s FY25F FFB production by 7% and increase revenue by 4%.

• We maintain HOLD on TSH Resources with a fair value of RM1.20/share, which is based on a FY25F PE of 15x. TSH is currently trading at a FY25F PE of 13.6x, which is higher than its 2- year average of 12x.

Source: AmInvest Research - 9 Aug 2024