• Maintain HOLD (TP: RM1.12) TSH Resources Bhd (TSH) 1HFY24 core PBT of RM90.7mn came in within our and consensus full year forecast, accounting for 54% and 45%, respectively. TSH’s earnings performance has gained traction, with 2QFY24 core PBT rising to RM53.2mn (+42% QoQ and +54% YoY), primarily due to higher average selling prices (ASP) of palm products during the period. Despite a challenging business environment that could affect its key segmental growth, we anticipate further earnings recovery in 2H supported by strong FFB output and expected stable CPO prices. We maintain our HOLD call on TSH, with a higher TP of RM1.12 (from RM1.01); based on P/BV of 0.7x and rolling over to FY25F BV/share of RM1.60.

• Key highlights. TSH’s 2QFY24, core PBT rose by 54% YoY to RM53.2mn, mainly driven by higher profit from palm product segment, increased contributions from associates and JV, and overall lower operating costs. On QoQ basis, core PBT surged by 42%, supported by higher revenue from palm products segment and bio-mass division, coupled with increased profits from associates and JV. The improved performance in the palm product segment was largely due to the increase in the ASP of CPO and PK, which rose to RM3,704 (+3.3% QoQ) and RM2,250 (+16.6% QoQ) respectively (table 3).

• Earnings Revision. No changes at this juncture.

• Outlook. We are cautiously optimistic about TSH's performance in FY24. Earnings may be bolstered by stable CPO prices and a seasonally stronger FFB output in 2H24, along with expected reductions in costs, particularly for fertilizer. Additionally, with a stronger financial position following the landbank disposal, management plans to resume new planting on its remaining unplanted landbank in the coming years and expand its renewable energy initiatives into Indonesia.

Source: BIMB Securities Research - 23 Aug 2024