• Overview. THP recorded a LATAMI of RM11.5m in 1Q20 against a LATAMI of RM8.1m in 1Q19 mainly due to unrealised foreign exchange loss, finance cost and fair value change in biological assets incurred amounting to RM18.4m, RM14.1m and RM10.8m respectively. On quarterly basis, narrower LATAMI were due the absence of impairment of plantation assets amounting to RM202.1m recognised in 4Q19.
• Key highlights. Revenue decreased 15.1% qoq (slight increase of +0.2% yoy) to RM115.6m mainly due to lower production and lower sales volume for CPO, PK and FFB during the quarter, despite recording a higher ASP realised of CPO, PK and FFB (Table 2).
• Against estimates: below. Result came-in below our estimates as lower revenue and higher operating cost dragged their earnings 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 remain cautious over its prospects as outlook of palm oil industry remains challenging.
• Our call. We have Non-Rated recommendation on the stock. Given the earnings results, we revised our forecast for FY20 and FY21 to a loss of RM29.7m and profit of RM10.4m respectively from a profit of RM1.8m and RM18.1m as we adjusted our ASP of palm products, production, costs and plantation’s margin

Source: BIMB Securities Research - 26 Jun 2020