• Overview. 3Q19 core LBT was narrower yoy on higher contribution from other income and margin income aided by lower depreciation and cost of sales. On qoq basis, on-top of higher revenue, the improved core LBT of RM2.3m was attributed by lower administrative and miscellaneous expenses compounded by 3% lower in finance costs.

• Key highlights. Higher finance cost in 3Q19 of RM20m vs. RM16m in 3Q18 (9M19: RM61m vs. RM46m in 9M18) was due to the adoption of MFRS 16 Leases.

• Against estimates: below. 9M19 core loss was below our estimates as lower revenue and higher finance costs dragged the results lower.

• Outlook. THP is highly exposed to the movement in palm products prices as it is a pure planter and thus, earnings are highly correlated to ASP of palm products and production. We believe THP’s medium-tolong-term prospect remains promising given its young age profile of 11 years that can provide visible revenue and earnings growth moving forward. During the nine-month period of 2019, THP FFB yield has improved by 2% to 13.58MT/ha (+2% yoy) with OER recorded at 20.13% vs. 19.90% in 9M18.

• Our call. We have Non-Rated recommendation on the stock. Maintain earnings forecast on the likelihood that bullish ASP realised of palm oil products and higher production will improved Q4 earnings. Average selling price realised of CPO improved marginally to RM1,916/MT from RM1,906/MT in 2Q19 (Table 2).

Source: BIMB Securities Research - 26 Nov 2019