Stripping out i) loss on foreign exchange (RM7.9m), ii) gain on disposal of PPE (RM27.6m) and one-off secondary listing expenses amounting to RM5.8m, TSH 9MFY23 core profit halved to RM79.8m. The results met our and the consensus full-year expectations, accounting for 77% and 80% respectively. Maintain Neutral with an unchanged TP of RM1.10 based on 13x FY24 EPS. No dividend was declared for the quarter.

• 3QFY23 revenue (QoQ: +16.4%, YoY: +13.7%). Revenue was higher at RM298.7m, mainly led by stronger plantation sales. Plantation revenue rose 18.2% YoY to RM279.3m, attributed to an increase in CPO price despite a slight decrease in FFB production. 3QFY23 average CPO prices climbed from RM3,234/mt to RM3,371/mt (9MFY23: RM3,465/mt, YoY: -19%) while average PK prices dipped from RM1,849/mt to RM1,664/mt (9MFY23: RM1,731/mt, YoY: -42%). 3QFY23 FFB production fell 2% YoY to 257,578mt (9MFY23: 679,031mt, YoY: -3%), mainly dragged by weaker production from Indonesia (-3%), partially mitigated by higher Malaysian production (+7.5%). Sales contribution from the non-core businesses contracted 26% YoY to RM19.4m.

• 3QFY23 core earnings jumped 74.5% YoY. 3QFY23 earnings would have been better if not because of the hefty Indonesian export levy and duty on CPO amounting to RM26.9m. Stripping out the exceptional items, the Group’s core earnings surged 74.5% YoY to RM32.1m, bolstered by steady plantation earnings while losses from non-core segment substantially narrowed from RM33.9m to RM3.7m. Meanwhile, earnings contribution from its 21.9%-owned Innoprise Plantations rose from RM3.2m to RM3.7m.

• Outlook guidance. Management expects CPO prices to be supported at current level underpinned by dry weather condition in South America, which threatens soybean production. The start of the monsoon season in Malaysia and Indonesia in Nov should lead to a slowdown in palm oil production. Lastly, the average age profile of its palm oil tree stands at 12 years.

Source: PublicInvest Research - 24 Nov 2023