• Overview. TSH’s registered a higher 4Q21 yoy core PBT of RM82.4m against RM35.9m in 4Q20, as higher contribution from Palm Product segment negated the loss incurred from other segments, as well as the cost incurred on Indonesia export levy and duty on CPO of RM43.6m (YTD: RM228.1m) versus RM15.1m incurred in 4Q20 (YTD20: RM43.3m). This was also aided by higher share of profits contributions from associate and JV amounting to RM18.99m (+128%) and RM35.89m (+49%) 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: Inline. TSH’s FY21 core profit before tax of RM267m was within our estimates.

• Dividend. TSH has declared an interim DPS of 3.0sen for 4Q21, bringing total dividend to-date for FY21 of 3.0sen (FY20: 1.5sen); translating to DY of 2.1%.

• Outlook. We foresee that TSH is set to sustain strong earnings given current higher CPO prices and expected 5%-7% improvement in FFB production of 965k-1.0m tonnes in FY22-FY23 against 919k tonnes achieved in FY20. Nonetheless, we expect TSH would unable to enjoy the full benefit of higher CPO price given c. 90% of its production are from estates in Indonesia which, the ASP realised are lower than Malaysia due to the biodiesel levy and export structure as well as Domestic Market Obligation (DMO) policy.

• Our call. To reflect current higher CPO price, we revised our FY22 and FY23 earnings forecast higher to RM168.3m and RM150.4m respectively from RM137.2m and RM112.5m previously; as we revisit our assumptions on ASP of CPO and PK, production, margins, cost and expenses to be more reflective to current and future expectations. We have raised our FY22/23 CPO price assumptions to RM3,600/MT- RM3,000/MT respectively from RM3,000/MT-RM2,700/MT previously; with new TP of RM1.49 against RM1.30 previously based on P/B of 1.19x and BV/share of RM1.25. As TSH’s share price has risen by 31% YTD, we now see the stock reaching closer to our valuation with an upside of 5.5% from current price. Hence, we changed our recommendation from BUY to HOLD.

Source: BIMB Securities Research - 24 Feb 2022