• Overview. TSH’s 4Q19 core PBT came-in higher yoy/qoq to RM16.1m, as revenue increased 18%/9% to RM241.5m on account of higher ASP of CPO realised. The stronger earnings were also lifted by higher share of profit from associate amounting to RM2.2m (+>100% yoy/qoq). Palm product segment profit jumped 49% qoq and 146% yoy respectively to RM38m as margin increased to 18% on higher ASP realized of CPO during the period (Table 2 and 3).
   
• Against estimates: below. Adjusted for the insurance claims and FV loss/gain on forex and derivatives, TSH’s FY19 core profit was below our and consensus’ estimates at 61% of full year forecast. This was mainly due to lower contribution from palm product segment, aided by lower share of profit from associate, higher finance costs and depreciation. Palm product margins dropped to 13.1% from 15.9% in FY18 mainly due to lower ASP realised of palm products. To recap, insurance claims amounting to RM41.7m is a result from a fire which occurred at a factory in TSH’s subsidiary, Ekowood International Berhad on 18 Feb 2019.

• Dividend. TSH has recommended a first and final dividend of 1.0sen (FY18: 1.0sen), if approved, translating to DY of 0.8%.

• Outlook. We believe earnings growth would be driven by expansion in production and improvement in palm product prices. In FY19, FFB production met our expectation, increasing 4.2% to 893.7k tonnes. Moving into FY20, we are projecting FFB production to rise by 8% to 964k tonnes.

• Our call. Maintain HOLD with TP of RM1.21 based on P/B of 1.2x and historical 3-yrs avg. TSH’s BV/share of RM1.01

Source: BIMB Securities Research - 27 Feb 2020