INVESTMENT HIGHLIGHTS

• 9MFY17 Core Net Income is below expectation due to weaker than expected earnings from its JV

• 9MFY17 Core Net Income improved 35% yoy

• Earnings estimate reduced

• FFB growth production outlook remains good

• Maintain BUY with lower Target Price of RM1.90

9MFY17 Core Net Income is below expectation. TSH Resources (TSH) 9MFY17 earnings came in weaker than expected at 66% of consensus and 59% of our full year estimates. This is caused by weaker than expected earnings from the JV with Wilmar in the downstream industry (9M17 PBT down 82% yoy to RM1.8m due to lower margin). In our CNI calculation, we have excluded RM11.4m in forex gain and RM0.3m in other one off items. As expected, no dividend is announced in the third quarter.

9MFY17 Core Net Income improved 35% yoy. This is in line with higher CPO price (+18% yoy to RM2727 per MT) and higher FFB production (+33% yoy to 537,000 MT).

Earnings estimate reduced. FY17 CNP is reduced by 15% to RM115m. We also lower our FY18 CNP by 16% to RM127m. We have assumed lower earnings from TSH JV with Wilmar.

FFB production growth outlook remains good. Despite the disappointment in the earnings from its JV, TSH prospect remains good for the next 12 months as we expect strong FFB growth of 16% in FY17 followed by 14% for FY18.

Maintain BUY with lower Target Price of RM1.90. The TP is based on unchanged Forward PE of 22.3x (mean valuation) on lower FY17 EPS estimate of 8.52 sen. We like TSH due to its strong 9MFY17 CNI which has grown 35% yoy and good FFB growth prospect supported by its young age profile of ~7.3 years old.

Source: MIDF Research - 23 Nov 2017