• Overview. After adjusting for fair value changes in forestry, biological assets and unrealised gain or loss in foreign exchange, TH Plantations (THP) recorded a 30% YoY contraction in core PBT to RM39.9mn in 4Q22. This wasin line with revenue that dropped by 11% YoY to RM219mn no thanks to lower revenue from sales of CPO, PK and FFB on account of lower average selling price (ASP) realised of CPO, PK and FFB (Table 2). Its form was also hurt by higher administrative and other costs. On quarterly basis, the increase in core PBT was mainly due to lower cost of sales and higher sales revenue of CPO despite lower ASP realised of RM3,764/MT (-6%).

• Key highlights. As of to date, THP managed to secure foreign workers quota of 816 of requirements for Peninsular, 866 for Sabah and 1,020 for Sarawak. Based on the ideal harvester’s ratio of 1:20ha, there is a shortage of approximately 746 harvesters currently (current harvester’s ratio is at 1:28ha).

• Against estimates: Inline. The result was within our estimates.

• Dividend. The Board declared a final DPS of 1.5sen for FY22, bringing total DPS for the year to 3.0 sen (FY21: Nil). This translates into a yield of 5.0%

• Outlook. In view of continues challenging business outlook, we are cautious on THP owing to 1) a projected increase in operational costs, 2) lower-than-expected production, and 3) a likely pullback in CPO prices which could drag earnings given THP earnings are highly correlated to ASP of palm products and production.

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

Source: BIMB Securities Research - 28 Feb 2023