• Overview. THP recorded a PBT of RM25.4m in 2Q20 against a LBT of RM14.5m in 2Q19 and RM29.1m in 1Q20 mainly due to higher production, sales volume of CPO and PK, lower cost of sales and gain on fair value change in biological assets amounting RM23.1m against FV loss of RM3.5m in 2Q19 and RM10.8m loss in 1Q20.

• Key highlights. Revenue increased 9.8% yoy to RM243.1m in 1H20 mainly due to higher ASP realised for CPO, PK and FFB, despite lower production and sales volume for CPO, PK and FFB (Table 2). CPO, PK and FFB prices increased 25%, 27% and 34% respectively to RM2,388/MT, RM1,463/MT and RM459/MT during the period.

• Against estimates: Above. Result came in above our estimates as higher revenue and lower cost of sales lifted its operating profit higher.

• Outlook. As THP’s 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 higher to RM10.1m and RM20.3m respectively from a loss of RM29.7m and a profit of RM10.4m previously as we adjusted our ASP of palm products, production, costs and plantation’s margin assumptions.

Source: BIMB Securities Research - 27 Aug 2020