1H21 core net profit of RM78.5m (+120.8%) beat expectations, accounting for 59.2-71.1% of consensus and our full-year estimates, due mainly to higher-thanexpected realised palm product prices. Maintain core net profit forecasts, sum - of-parts TP of RM1.24 and BUY rating for now, pending a sector-wide review on our CPO price assumptions (with upside bias). Based on our estimates, every RM100/mt change in our CPO price assumption will result in TSH’s PBT changing by RM10m p.a..

Beat expectations. 2Q21 core net profit of RM47.7m (QoQ +55.3%; YoY: +309.1%) took 1H21 sum to RM78.5m (+120.8%). The results beat expectations, accounting for 59.2-71.1% of consensus and our full-year estimates, due mainly to higher-thanexpected realised palm product prices.

Exceptional items (EIs) in 1H21. Core net profit of RM78.5m in 1H21 was arrived after adjusting for (i) RM11.6m unrealised forex loss, (ii) RM12.2m fair value gain on derivatives, (iii) RM3.9m impairment, (iv) RM3.5m write-fown, (v) RM1.6m write-off, (vi) RM1.4m fair value gain on biological assets, and (vii) RM18.9m loss on commodity futures contracts.

QoQ. Core net profit surged 55.3% to RM47.7m in 2Q21, boosted mainly by higher realised average CPO price (+14.3%) and FFB output (+11.8%) at palm produc t segment, and higher JV and associate contributions. All these were however partly negated by weaker performance at cocoa segment.

YoY. Core net profit more than tripled to RM47.7m in 2Q21 (from RM11.7m SPLY), boosted mainly by higher FFB output (+16.5%) and realised average CPO price (+63.9%), and associate earnings (51.9%-owned Innoprise), but partly negated by weaker JV contribution (TSH-Wilmar, which TSH has a 50% stake) and losses at cocoa segment.

YTD. Core net profit more than doubled to RM78.5m in 1H21 (from RM35.5m SPLY), boosted mainly by significantly higher plantation earnings (arising from higher realised average CPO price and higher FFB output).

Forecast. Maintain for now, pending a sector-wide review on our CPO price assumptions (with upside bias). Based on our estimates, every RM100/mt change in our CPO price assumption will result in TSH’s PBT changing by RM10m p.a..

Maintain BUY, TP: RM1.24. Maintain BUY rating, with an unchanged sum-of-parts TP of RM1.24 (see Figure #2).

Source: Hong Leong Investment Bank Research - 25 Aug 2021