Overview. Adjusted for fair value change on biological assets of RM16.6m vs. RM20.8m in 3Q20, THP recorded a core profit before tax of RM43.1m in 3Q21 against RM24.9m in 3Q20. This was mainly due to higher ASP realised of FFB, CPO and PK, despite registered lower sales volume and higher cost of sales. On quarterly basis, the higher core PBT was supported by higher sales volume and ASP realised of CPO, PK and FFB during the period -Table 2.

Key highlights. Revenue increased 25%/23% yoy to RM513.3m in 9M21 and RM205.9m in 3Q21 mainly due to higher ASP realised for CPO, PK and FFB, despite lower production and sales volume for CPO and PK as well as higher cost of sales amounting to RM348.4m (RM133.0m in 3Q21) as opposed to RM283.3m registered in 9M20 (RM111.7m in 3Q20).

Against estimates: Above. Result was above our estimates. Core PBT improved more than 100% to RM25.8m mainly due to higher ASP realised (Table 2) of CPO, PK and FFB despite lower sales volume for CPO, PK and FFB. The fair value changes in biological assets were the key variances in our core earnings.

Outlook. We believe earnings performance would be sustainable, in view of 1) higher ASP realised of palm products given current CPO prices are trading at multi-year high and trade above RM4,000/MT, 2) harvestable areas and crops age profile has improved, and 3) effective cost management and improvements in efficiency by the company. This is also aided by the on-going progress of THP’s Strategic Recovery Plan, in our opinion, would make its earnings target justifiable. Following this result, we revised our FY21/FY22 earnings forecast higher to RM56.6m and RM41.2m respectively from RM44.4m and RM40.6m previously as we adjusted our assumptions on costs and margins including tax and levy.

Our call. We have non-Rated recommendation on the stock.

Source: BIMB Securities Research - 25 Nov 2021