• THP’s FY17 net earnings of RM36.7m came in below our estimates but adjusted PBT of RM76.9m was above our forecast of RM53.2m.

• Core PBT more than doubled to RM76.9m on the back of 23% increase in revenue to RM689.2m on account of higher production and sales transacted volume – aided by higher ASP realized of palm products.

• As for 4Q17, PBT fell 69.5% yoy to RM34m mainly because of the gain incurred in 4Q16 from the disposal of shares in subsidiary company, THP Gemas amounting to RM112.58m and higher effective tax rate.

• On qoq basis, earnings increased 52% resulted from higher ASP realized of palm products, lower finance costs and higher contribution from other income.

• Proposed a final dividend of 2sen, bringing total dividend for FY17 to 3.6sen per share.

PATAMI impacted by higher tax rate

THP’s FY17 revenue increased 23% yoy to RM689.2m contributed by higher sales volume and higher ASP realized in palm products. Core PBT increased by 139% to RM76.9m mainly due to 1) higher volumes and ASP of palm products; 2) lower estates unit cost of production by 7% yoy to RM240/MT; 3) lower CPO unit cost of production to RM1,570/MT vs. RM1,579/MT in FY16; and 4) an extraordinary gain of RM112.58m from the disposal of shares in subsidiary company which was recognized in 4Q16.

Higher qoq performance for 3Q17

On qoq basis, PBT increased 52% resulted from higher ASP realized, lower finance costs and higher contribution from other income. On the other hand, lower yoy results was due to lower ASP realized of palm products, lower contribution from other income, higher administrative expenses and an extraordinary gain on disposal as mentioned above.

Proposed 2.0sen final single-tier dividend

THP’s has proposed 2sen final single-tier dividend for FY17, bring the total dividend for FY17 of 36sen (FY16: 0sen). Based on current market price, this translate into DY of 3.7x.

Maintain earnings forecast

We keep our FY18 and FY19 earnings forecast unchanged. We believe THP medium-to long term prospect remains promising given its young age profile of 10yrs can provide visible revenue and earnings growth catalyst moving forward. We have NON-RATED recommendation on the stock.

Source: BIMB Securities Research - 1 Mar 2018