• TSH’s 9M16 net profit of RM79.6m was in-line with our expectation, making up 89% of our full year forecast.

• Core PBT was 5% higher yoy to RM81.6m due to higher contribution from palm product segment and jointly controlled entities and associate company.

• The better results were mainly due to higher average palm product selling price realised, aided by foreign exchange translation gain of RM21.9m as opposed to a losses of RM105.3m recorded in 9M15.

• We tweaked our FY17 earnings forecast higher, and changed our TP to RM2.00 from RM1.86 previously.

• Maintain HOLD recommendation.

Within expectation. TSH’s net profit of RM79.6m came in within our expectation and consensus estimates. Stripping out exchange gain of RM21.9m, net profit was 18% lower at RM57.8m. The lower core net profit was due to the weaker contribution from both wood product manufacturing and bio integration and others segments, which were impacted by i) lower margin - disposal of old stocks at lower average selling price for wood product; ii) higher raw material cost of cocoa product and lower sale of electricity and steam; and iii) write back of provision for impairment loss in 2015 on the plant disposal.

Palm product division. In 9M16, palm product division posted revenue and segment profit of RM542.9m (+4.1% yoy) and RM94.5m (+7.1% yoy) respectively due to the higher average CPO price realised of RM2,356/MT against RM2,099/MT in 9M15. However, FFB and CPO production slipped by 10% and 15% yoy to 403,447 MT and 176,242 MT respectively, due to the prolonged dry weather and after-effect caused by the 2014 droughts and the severe 2015/2016 El-Nino weather pattern that has badly impact the crop in 1Q and 2Q of 2016.

Source: BIMB Securities Research - 1 Dec 2016