• Non-Rated. TH Plantation Berhad (THP) reported a 60% YoY decrease in its core PATAMI for FY23, amounting to RM29.6mn. This decline is primarily attributed to lower operating profits resulting from a 15% decrease in revenue, amounting to RM752mn. The decrease in revenue is attributed to lower average selling prices (ASP) for CPO and PK, despite a higher sales volume for these commodities. However, this impact has been partially offset by a 27% decrease in finance costs to RM52.8mn, along with higher sundry income of RM21.3mn (compared to RM10.3mn in FY22). The result exceeded both our and consensus expectations, accounting for 115% and 132%, respectively. Overall, we maintain a positive outlook on its long-term prospects, as it is set to leverage improved production and sales volume, as well as better palm oil product prices, subject to CPO price movements, in addition to an expected 10% year-over-year production growth for this year (approximately 860,000 metric tons). The Group declared a total DPS of 2 sen for FY23, translating into a DY of 2.8% at the current market price (FY22: 3sen). We have a non-rated call on the stock.

• Key highlights. THP's core PBT decreased by 48% YoY to RM68.9mn, primarily attributed to lower ASP realised for CPO, PK, and FFB, despite a 13% increase in FFB production to 787,741 metric tons. This increase in production is due to an improvement in FFB yield from 13.21 metric tons per hectare (MT/ha) recorded in FY22 to 15.18 MT/ha in FY23.

• Earnings Revision. In view of higher FFB and CPO/PK production during the period, we revised our FY24 earnings forecast higher to RM32.2mn from RM28.5mn previously, as we revisit our assumptions on production and ASP of palm products to be more reflective of our current and future expectations.

• 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 Feb 2024