Period  1Q14

Actual vs. Expectations TSH Resources (TSH)’s 1Q14 core net profit (CNP)* of RM33.8m is within expectations, at 22% of the street’s FY14E CNP of RM153.4m and 17% of our estimate of RM203.9m. In the past three years, 1Q CNP made up 16% to 18% of full-year CNP due to seasonally lowr FFB production during the quarter.

Dividends  As expected, no dividend was announced.

Key Results Highlights YoY, 1Q14 CNP surged 52% to RM33.8m as CPO prices improved 18% to RM2543/mt while FFB volume jumped 22% to 156,742 mt.

 QoQ, 1Q14 CNP declined 40% to RM33.8m due to seasonally lower FFB volume (-3% to 156,742 mt).

Outlook  We believe that the strong 52% YoY earnings growth in 1Q14 result will be the near-term catalyst for the share price. Management expects “improved profit in the coming quarters” and we believe FY14 will be a much better year than FY13. We reiterate our view that TSH will benefit most from higher CPO prices due to its highest FFB growth potential among planters under our coverage.

Change to Forecasts  Maintain FY14E-FY15E CNP of RM204m-RM214m.

Rating Maintain OUTPERFORM

We continue to like TSH due to its trees’ young age profile of about 6.5 years and superior FFB growth of 18% in FY14E (against peers’ average of 10%).

Valuation  Maintain our TP of RM4.10 based on unchanged Fwd. PE of 18x on FY14E EPS of 22.7 sen. Our Fwd. PE of 18x is based on +1.0SD valuation to reflect TSH’s good cost management and best FFB growth potential.

Risks to our call Lower-than-expected CPO prices and FFB growth.

Source: Kenanga