INVESTMENT HIGHLIGHTS

• 9MFY18 Core Net Income is below expectation

• Core PBT declined due to lower CPO price yoy

• Earnings estimate lowered

• Maintain Neutral with a revised TP of RM1.05

9MFY18 Core Net Income is below expectation. TSH Resources (TSH) 9MFY18 core net income (CNI) of RM41.5m is below expectations as it makes up 57% of ours and 64% of consensus earnings estimates, respectively. The weaker than expected earnings was caused by higher than expected cost. In our CNI calculation, we have excluded mainly RM11.6m in forex loss. As expected, no dividend was announced.

Core PBT declined due to lower CPO price yoy. This is caused by lower revenue (down 15% yoy to RM685m) as CPO price realized of RM2205 per tonne is lower by 19% yoy. Although 9MFY18 FFB production has improved by 21% yoy to 651,927 tonnes, it was not enough to offset the impact of lower CPO price.

Earnings estimate lowered. FY18 CNI has been reduced by 11% to RM65.1m. FY19 CNI has been reduced by 13% to RM66.7m. We have increased our cost assumption.

Maintain Neutral with a revised TP of RM1.05. Our TP has been lowered to RM1.05 (previously: RM1.18) 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 - 30 Nov 2018