FY22 core net profit of RM187.5m (+2.1%) missed expectations, accounting for only 90.7-92.1% of consensus and our estimates. Results shortfall came largely from weaker-than-expected performance at other segment (in particular, the cocoa processing and marketing sub-segment, we believe). Proposed final DPS of 2.5 sen (subject to shareholders’ approval in the upcoming AGM), bringing total DPS for FY22 to 10.5 sen. Maintain earnings forecasts, TP of RM1.12 (based on unchanged 15x FY24 core EPS of 7.5 sen) and HOLD rating on TSH.

Missed expectations. 4Q22 core net profit of RM15.2m (-59.3% QoQ; -71.4% YoY) brought FY22 total sum to RM187.5m (+2.1%). The results missed expectations, accounting for only 90.7-92.1% of consensus and our estimates. Results shortfall came largely from weaker-than-expected performance at other segment (in particularly, the cocoa processing and marketing sub-segment, we believe).

Exceptional items (EIs) in FY22. Core net profit of RM187.5m in FY22 was arrived after adjusting for (i) RM4.0m unrealised forex gain, (ii) RM1.7m FV loss on derivatives, (iii) RM63.1m impairment, (iv) RM16.9m write-downs and write-offs, (v) RM0.7m FV loss on biological assets, and (vi) RM37.2m FV loss on forest planting expenditure.

Dividend. Proposed final DPS of 2.5 sen (subject to shareholders’ approval in the upcoming AGM), bringing total DPS for FY22 to 10.5 sen.

QoQ. Core net profit fell by -59.3% to RM15.2m in 4Q22, dragged mainly by a -15.6% decline in FFB output and lower realised PK price, and weaker performance at other segment (the cocoa processing and marketing sub-segment, we believe).

YoY. Core net profit fell by -71.4% to RM15.2m in 4Q22, dragged mainly by lower realised palm product prices, higher CPO production cost (arising from higher fertiliser prices), as well as weaker associate and JV contributions.

YTD. FY22 core net profit rose marginally by 2.4% to RM188.1m, as higher realised palm product prices (CPO: +15%; PK: +13%) was partly weighed down by lower associate and JV contribution and higher CPO production cost.

Outlook. Management continues to see uncertain near-term prospects, due to concerns over global economic slowdown and declining inflationary pressure, while at the same time bolstered by China’s reopening.

Forecast. Maintain.

Maintain HOLD with unchanged TP of RM1.12. We maintain our HOLD rating on TSH, with an unchanged TP of RM1.12 (based on unchanged 15x FY24 core EPS of 7.5 sen). While we like TSH for its favourable age profile (average age of 11.7 years as of Sep-22) and improving balance sheet, further upside is capped by the absence of earnings growth catalyst.

Source: Hong Leong Investment Bank Research - 24 Feb 2023