• THP’s 9M17 net earnings of RM29.9m came in line with ours estimates but missed consensus forecast by 15%.

• PBT increased more than threefold to RM527m on the back of 30% increase in revenue to RM511m – improving margin to 10.3% from 4.1% in 9M16.

• However for 3Q17, earnings fell 40% yoy to RM11.5m mainly because of higher finance costs of RM14.5m (3Q16: RM5.0m) and higher effective tax rate.

• On qoq basis, earnings increase 59% as higher sales volume of CPO, PK and FFB raised revenue higher as well as higher ASP for PK.

• We keep our FY17 and FY18 forecast unchanged, and maintaining our TP of RM1.20.

Higher production and ASP

THP’s 9M17 revenue increased 30% yoy to RM511m contributed by higher sales and higher ASP realized in palm products as well as management fees received in managing 20,923ha of Tabung Haji group’s plantation assets of RM740k. Net profit increased by 52% yoy mainly driven by i) higher revenue – due to higher ASP of palm products; ii) lower estates unit cost of production of RM234/MT vs. RM253/MT in 9M16; iii) lower CPO unit cost of production by 9% yoy to RM1,284/MT; and iv) higher other income arising from deferred income on government grant amounting to RM12.6m.

Higher qoq performance for 3Q17

On qoq basis, the increase in 3Q17 net profit is attributable to the effect of higher sales volume of palm products as well as higher ASP realized for CPO, PK and FFB. On the other hand, lower yoy results was due to higher finance costs and higher effective rates charged. The increase in finance cost took into account lower amount of capitalization for plantation development expenditure as more areas came into maturity.

Maintain earnings forecast

We keep our FY17 and FY18 earnings forecast unchanged and maintain our TP of RM1.20 on PER of 20x over FY18 EPS. We have NON-RATED recommendation on the stock.

Source: BIMB Securities Research - 23 Nov 2017