INVESTMENT HIGHLIGHTS

• 1HFY18 Core Net Income was below expectation

• Core PBT declined due to lower CPO price yoy

• Earnings estimate lowered

• Maintain Neutral with a revised TP of RM1.18

1HFY18 Core Net Income was below expectation. TSH Resources (TSH) 1HFY18 core net income (CNI) of RM25.0m was below expectations as it makes up 34% of ours and 32% of consensus earnings estimates, respectively. The weaker than expected earnings was caused by higher than expected cost. In our CNI calculation, we have excluded RM14.0m in forex loss and RM2.3m net write-offs. As expected, no dividend was announced.

Core PBT declined due to lower CPO price year-on-year. This was caused by lower revenue (down 16%yoy to RM459.1m) as CPO price realized of RM2,283 per tonne was lower by 14%yoy. Although 1HFY18 FFB production improved by 24% yoy to 401,723 tonnes, it was not enough to offset the impact of the lower CPO price.

Earnings estimate lowered. For FY18, we reduced CNI by 2% to RM73.0m. For FY19, CNI has been reduced by 4% to RM76.4m. We have increased our cost assumption.

Maintain Neutral with a revised TP of RM1.18. Our TP has been lowered to RM1.18 (previously: RM1.20) 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 Aug 2018