INVESTMENT HIGHLIGHTS

• 1QFY18 Core Net Income is below expectation

• Core PBT declined 52% yoy to RM17.0m

• Earnings estimate lowered

• Maintain Neutral with a revised TP of RM1.30

1QFY18 Core Net Income is below expectation. TSH Resources (TSH) 1QFY18 core net income (CNI) of RM4.7m is below expectations at 5% of ours and 4% of consensus earnings estimates, respectively. The weaker than expected earnings was caused by higher than expected cost. In our CNI calculation, we have excluded RM11.2m in forex gain and RM1.8m net writeoffs. As expected, no dividend was announced.

Core PBT declined 52% yoy to RM17.0m. This is caused by lower CPO price (-22% yoy to RM2316 per tonne). Although FFB production has improved (+22% yoy to 181,219 tonnes), it was not enough to offset the impact of lower CPO price.

Earnings estimate lowered. FY18 CNI has been reduced by 10% to RM80.6m. FY19 CNI has been reduced by 10% to RM86.8m. We have increased our cost assumption.

Maintain Neutral with a revised TP of RM1.30. Our TP has been lowered to RM1.30 (previously: RM1.45) in line with lower Core EPS assumption for FY18. Valuation method is unchanged by using 22.3x Forward PE which reflects mean valuation. Maintain Neutral on TSH due to its unexciting earnings outlook in the near term.

Source: MIDF Research - 24 May 2018