• Placement of 25.0m shares

• We expect EPS dilution of less than 1%

• Neutral on the news

• Earnings estimate maintained

• Maintain BUY with TP unchanged at RM2.15

Placement of 25.0m shares. TSH Resources Berhad (TSH) has proposed placement of 25.0m shares representing 1.84% of its existing share base of 1.36b. While the issue price has yet to be fixed, the amount raised would be RM43.25m based on the illustration price of RM1.71. The proceeds raised would be utilised for working capital purposes.

We expect EPS dilution of less than 1%. We expect FY17/FY18 EPS to be diluted by 0.5%/0.6% respectively. Key assumptions are interest saving of RM1.7m based on 4.0% interest cost and share base expansion by 25.0m to 1.38b.

Neutral on the news. We are neutral on the news as we expect EPS dilution to be less than 1%. Positively, TSH net gearing is expected to decline to 0.86x (from 0.93x as of end-2016).

Earnings estimate maintained. Pending the actual placement price, we maintain our earnings estimate for both FY17 and FY18.

Maintain BUY with TP of RM2.15. The TP is based on Forward PE of 22.3x (mean valuation) on FY17 EPS estimate of 9.65 sen. We continue to like TSH for: i) its strong 1QFY17 earnings which has improved 71%yoy, ii) attractive valuation of 17.8x Forward PE which is below its - 0.5SD valuation of 18.5x and iii) its young age profile of ~7.3 years old which should allow them to register better FFB growth in the long run.

Source: MIDF Research - 10 Jul 2017