No immediate impact on earnings, assets, liabilities or the issued share base. However, the investment case for TSH is better somewhat along with its longer-term prospects once this proposal for a secondary listing in SGX goes ahead. Meanwhile, we are keeping our FY23─24F forecasts, TP of RM1.10 and MARKET PERFORM recommendation.

Singapore Exchange Securities Trading Limited (SGX). As of June 2023, there are 640 listed companies with a market cap of nearly RM2 trillion in the SGX. Foreign companies made up about a third of all the listed companies and its market cap. Currently, there are seven palm oil-related groups listed in the SGX, from SGD25b market cap giant Wilmar to Golden Agri-Resources (SGD3b), Bumitama (SGD1b) and downstream specialist Mewah International (

Secondary listing on SGX’s Main Board. TSH’s primary listing will remain on Bursa’s Main Board. The current proposal is just for a secondary listing and quotation on the Main Board of the SGX. No new share will be issued and no fund will be raised. The reasons given are: (a) to widen existing shareholding base, (b) provide additional funding avenue if need be, and (c) greater regional/international visibility.

Unique proposition: TSH is unusual among Bursa-listed plantation entities as the bulk of its earnings are already from Indonesia and much of its future organic expansion will be as well. Understandably, the group wants fund flexibility beyond ringgit-centric avenues. Equally important, it could also ease any pending acquisition/disposal with Indonesian parties as many are quite at home with the SGX and Singapore. At the same time, keeping its primary listing with Bursa is sensible as Malaysia is still home to some of the world’s leading plantation groups.

No impact to earnings: Maintain average CPO price of RM3,700 per MT over FY23─24F on a tight supply-demand scenario. The global edible oil supply is improving but so is demand thus inventory is still fragile into 2024. Meanwhile, the risk of a 2024 supply downgrade due to El Nino has risen, hence higher CPO prices moving forward cannot be ruled out. However, margins are expected to stay challenged for 1HFY23 with cost more likely to ease from 2HFY23 onwards. Wages uptrend is continuing but fertiliser and energy costs have fallen. Seasonally higher harvest in the second half should also ease unit cost.

Long-term expansion from the development of 20k─25k ha of empty oil palm land TSH already owns. Prior to FY22, high gearing held back development but strong operating cash flows, part-sale of NE Kalimantan landbank (RM429m) and sales of two Sabah estates (RM258m) during FY22 cut end-FY21 net debt of RM816m to just RM131m as of 31 March 2023 so planting of the empty land should start within a year.

Maintain MARKET PERFORM, FY23─24F CEPS and TP of RM1.10, which is based on FY24F CEPS at 11x PER given the group’s smaller market capitalisation (integrated target PER is 15x), 3-star ESG rating and undemanding P/NTA of 0.6x.

Risks to our call include: (i) adverse weather, (ii) revision in Indonesia’s levy and export tax structure, and (iii) volatile CPO price and costs.

Source: Kenanga Research - 24 Jul 2023