Overview. TSH’s 3Q21 core PBT came in higher yoy at RM90.9m against RM25.6m in 3Q20, as higher contribution from Palm Product segment negated the loss incurred from others segment, as well as the additional cost incurred on Indonesia export levy and duty on CPO of RM51.1m to RM59.7m versus RM8.7m incurred in 3Q20. This was also aided by higher share of profits contributions from associate and JV amounting to RM5.3m (+133%) and RM8.6m (+148%) respectively. On quarterly basis, the higher earnings were due to higher average selling price realised of CPO and higher share of profits contributions from associates and joint ventures.

Against estimates: Above. TSH’s 9MFY21 core profit before tax of RM211m came in above our estimates, as higher-than-expected ASP realised of CPO and lower effective tax rate incurred were the key variances against our forecast. Despite being impacted by RM156.4m increase in export levy and duty in Indonesia amounting RM184.6m, higher margin from Palm Product segment and share of profit contribution from an associate, Innoprise, contributed to the stronger results.

Outlook. Although volatility remains present with the increase concern of ESG issues in the industry, we are positive on TSH’s long-term earnings growth prospect. We foresee that TSH is set to record strong earnings given higher CPO prices should see TSH fetching better margins, backed by the expected 10% improvement in FFB production of 997k/1.0m tonnes in FY21/22 against 906k tonnes achieved in FY20.

Our call. Given the encouraging results, we revised our FY21/22 earnings forecast higher to RM146.6m and RM137.2m respectively from RM121m and RM108.5m with new Target Price of RM1.30 vs. RM1.23 previously based on Price/Book of 1.1x and BV/share of RM1.18; as we revisit our assumption on ASP of palm products, margins, cost and expenses including tax and levy to be more reflective to current and future expectations. We have raised our FY21/22 ASP forecast for CPO to RM3,500/MT and RM3,000/MT respectively from RM3,280/MT and RM2,700/MT previously. Maintain BUY.

Source: BIMB Securities Research - 24 Nov 2021