Posted by kcchongnz > Jun 19, 2013 03:44 PM

TSH again? A great company? Not in my book. 

Posted by fatinvest > Jun 18, 2013 08:10 PM | Report Abuse 
I think TSH can be classified as a potential good stock simply because it has >110,000 hectares of land , of which only about 50,000 hectares had been planted ( with relatively young oil palm trees ). 
Its planted acreage now is roughly the same as United Plantation, whereas the profit is only about one third of United Plant. 
If it has fully planted all the 110,000 hectares of land and only making 80% of what United Plant makes, the profit will still be 5x what it makes now. 
I see potential in this company. 
KC mind to share your view on this? 

This was what I posted some time ago. 

Posted by kcchongnz > Jun 10, 2013 07:30 PM | Report Abuse X 
Is TSH a good company? Is it a great investment? 

TSH is a darling stock for most investment bankers and analysts. Phillip Capital is one of them who has been continuously recommending this stock since three years ago. They expect TSH will have explosive growth for the next 20 years for its palm oil production! Analysts have projected the planting and increased in acreage in its palm oil crop and I believe they have done a thorough job. 

We will let the job of projection to the analysts as this is their rice bowl. But we just peep through the recent past and see how TSH has been doing in its business. The Table below shows it revenue and net income from 2006 to 2012. 

Year 2012 2011 2010 2009 2008 2007 2006 CAGR 
Revenue, m 984 1134 910 989 1110 862 625 8% 
EBIT, m 112 167 115 89 101 117 74 7% 
Net Income, m 84 130 92 64 85 110 73 3% 
EPS, sen 9.1 14.4 10.3 6.7 9.8 11.5 8.6 

I personally don’t see the “explosive growth in this company, especially the last three years since Phillip Capital started to make the projection. Do you? Ok I know I know, it is the future, the next 17 years. It is just that I am a suspicious person who doesn’t easily believe anything until I have seen it. 

The following table shows the cash flow of TSH for the past few years. 

Year 2011 2010 2009 2008 2007 2006 
CFFO, m 17 153 120 147 15 48 91 
Capex -225 -225 -225 -225 -225 -225 -225 
FCF -208 -71 -104 -78 -209 -177 -134 
CFFO/NI 20% 118% 131% 230% 18% 43% 124% 

What is the problem with its cash flow? Why is the quality of earnings so bad last year with CFFO only 20% of net income? Do you see any positive free cash flow, even in a single year? 

How is its balance sheet then? The table below shows how its debt has been increasing each year and it is now closed to a billion ringgit of total debt now. 

Year 2012 2011 2010 2009 2008 2007 2006 
Total debt, m 975 740 722 603 468 261 186 

How is its performance for the past years in term of ROE, ROIC? Do you find them impressive? 

Year 2012 2011 2010 2009 2008 2007 2006 
ROE 8.5% 13.7% 10.9% 7.8% 11.6% 15.2% 13.9% 
ROIC 5.4% 8.5% 6.9% 6.0% 8.2% 11.6% 10.6% 

What about its valuation with its share price closing at RM2.50 today? Judge yourself from my assessment below. 

TSH a Good company? 2.500 
Good governance ? 
Durable business Yes 
Growth ? 
ROE No 9% <12% 
ROTC No 6% <WACC 
Balance sheet No 1.10 D/E>1 
Cash flow No No FCF for years 

Screens for investing 
ROTC No 6% <WACC 
P/B No 2.4 >2.0 
PE ratio No 27.4 >20

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