25% FY13 earnings growth. We recently upgraded TSH's FY13 estimated earnings to RM157.1m for FY13, up 8.4% from our previous forecast for RM145.0m. This followed an upgrade on our 2013 average CPO price assumption to RM3,500 per tonne, which triggered a round of upward earnings revision across our plantation universe for FY13. Our move to OVERWEIGHT the plantation sector on 9 July 2012 stems from our belief that palm oil price is still at the early stage of a 3-year upcycle, fuelled by the rising possibility of an El Nino occurring in 4QCY12/1QCY13, as well as a potential peak in Indonesia's production in 2015. Hence we expect TSH's FY13 earnings to jump 25.4% y-o-y, buoyed by firmer prices and positive FFB production growth.

Cutting FY13 production forecast. In line with our view that the upcoming El Nino will not be a mild one, we are toning down our FY13 FFB production growth forecast to 9.7% from 18.5% previously. As TSH has planted over 21.8k ha of oil palm since 2006, 75.0% of its trees are still below peak production, thus giving it the 4th most favourable tree age profile within our 18-stock plantation universe. This leads us to believe that organic production growth from its young trees will sufficiently mitigate the production losses arising from the anticipated dry weather. TSH's rising share of production from its Kalimantan operations will also boost CPO production somewhat, as the OERs from that region tends to be a higher ~25% versus Malaysia's typical 20%-22% due to the less weathered soil.

Looking to buy brownfield Sabah land. On 26 June 2012, TSH proposed to purchase the remaining 80.2% it does not own in Pontian (non-listed) for a price consideration of RM624.8m, of which 50.1% will be funded through borrowings and the remainder through new stock issuance. Although the number of the company's outstanding shares will go up by 17.6% as a result of the exercise, we believe that the acquisition should be EPS-accretive right off. The acquisition, priced at a 10.9x FY11 PER, should perk up TSH's FY13 EPS by some 9.8% (please see Figure 1).