• Overview. THP recorded PBT of RM25.4m in 1Q21 against a loss before tax of RM14.5m in 1Q20 mainly due to higher ASP realised of FFB, CPO and PK. On quarterly basis, the higher PBT was supported by gain in fair value change in biological assets of RM14.89m against RM28.96m loss in 4Q20; aided by lower impairment of assets by RM8.6m to RM0.09m and lower operating expenses of RM3.57m against RM7.03m in 4Q20. Nonetheless, revenue dropped 9.2% qoq to RM131m on lower CPO and PK sales volume, despite achieving higher ASP realised for CPO, PK and FFB (Table 2).

• Key highlights. Revenue increased 13.6% yoy to RM131.2m in 1Q21 mainly due to higher ASP realised for CPO, PK and FFB, despite lower production and sales volume for CPO and PK (Table 2) as well as higher cost of sales amounting to RM95.26m as opposed to RM79.16m registered in 1Q20. PBT returned to black for a two-consecutive quarter, registered at RM25.4m against LBT of RM14.6m mainly due to 1) gain in fair value change in biological assets of RM14.89m against RM10.80m loss in 1Q20, 2) lower unrealised foreign exchange loss amounting to RM1.97m against loss of RM18.41m in 1Q20, 3) lower impairment assets of RM0.09m vs. RM0.14m in 1Q20, and 4) higher other income of RM1.3m against RM1.04m in 1Q20 on account of higher management fees of 1.1m against RM0.4m in 1Q20.

• Against estimates: Inline. Result came in within our estimates.

• Outlook. As THP’s earnings are highly correlated to ASP of palm products and production, we believe earnings would be sustained in this financial year given current CPO prices are trading at multi-year high and trade above RM4,000/MT. This is also aided by the on-going progress of THP’s Strategic Recovery Plan, in our view, that would make its earnings target justifiable.

• Our call. We have Non-Rated recommendation on the stock.

Source: BIMB Securities Research - 28 May 2021