• Non-Rated. TH Plantation Berhad (THP) reported a 25% YoY decrease in its PATAMI for the 9MFY23, amounting to RM34.3mn. This decline is primarily attributed to lower operating profits resulting from a 19% decrease in revenue, amounting to RM535.5mn. The decrease in revenue is attributed to lower average selling prices (ASP) for CPO, PK, and FFB, despite a higher sales volume for these commodities. However, this impact has been partially offset by a 25% decrease in finance costs to RM40mn, along with higher sundry income of RM20mn (compared to RM14mn in 9MFY22) and a fair value gain in biological assets of RM9.7mn (compared to a fair value loss of RM17mn in 9MFY22). After adjusting for fair value changes in forestry, biological assets and unrealised gain or loss in foreign exchange, THP recorded a 60% YoY contraction in core PBT to RM36.6mn in 9MFY23. Despite this, the 9MFY23 core PBT was within our expectations, accounting for 76% of our full-year forecast, although its PATAMI trailed both our and consensus expectations. All in all, we maintain a positive outlook on its long-term prospects, as it is set to leverage on improve in production and sales volume, as well as better palm oil products price, subject to CPO price movement (expected to trade RM400/MT above or below RM3,800/MT for the rest of the year), in addition to an expected 15% YoY production growth for this year (c. 800k MT). We have a non-rated call on the stock.

• 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 558 harvesters currently (current harvester’s ratio is at 1:26ha i.e., 1,946 harvester).

• Earnings Revision. No changes at this juncture.

• Outlook. We maintain our view that THP may face potential risks that could impact its earnings this year, among others, if there is: 1) a huge pullback in palm product price, 2) a hiccup in production, and 3) an increase in operational costs.

Source: BIMB Securities Research - 29 Nov 2023