Results

• 2015 core net profit of RM96m (-25.2% yoy) came in within expectations, accounting for 99-101% of consensus and our full-year forecasts.

Deviations

• -

Dividend

• Proposed a final dividend of 2sen/share and this translates into dividend yield of 1.0%.

Highlights

• Decline in 2015 full year core net profit was mainly due to lower contribution from palm product division which was affected by lower CPO price and lower CPO production with less external fruit intake (FFB production up 1.2% yoy). It has also reported a one-off loss of RM139.1m as it discontinued its Eko Pulp & Paper business

• For 4Q15, core net profit was up 7.6% qoq (+21.0% yoy) supported by better contribution from its palm product division. TSH has reported better FFB and CPO production growth of 30.1% qoq (+25.9% yoy) and 12.3% qoq (-1.0% yoy) respectively while CPO ASP remained flat qoq (-7.3% yoy).

• Marginal FFB production growth in 2016. We expect marginal production growth of 0-3% for 2016, in line with management guidance. Its Sabah and Kalimantan’s estates have experienced prolonged dry weather last year which would affect its production in 2016. Furthermore, its Kalimantan’s estates also suffered from dry weather in 2H14 which would lead to 20-24 months lagged impact on production in 2H16.

Risks

• Weaker-than-expected FFB production and OER;
• A sharp increase in production cost; and
• A sharp decline in vegetable oil prices.

Forecasts

• We tweak ours 2016 and 2017 earnings forecasts marginally to factor in 2015 performance.

Rating

HOLD

Positives

• - (1) Stable cash flow from alternative power plant; and (2) Favourable long term outlook of the oil palm business.

Negatives

• High net gearing and relatively stretched valuation.

Valuation

Maintain HOLD recommendation with TP of RM1.90 based on SOP valuation.

Source: Hong Leong Investment Bank Research - 26 Feb 2016