TDM’s  FY13  net  profit  was  in  line  with  our  expectations,  falling  54% y-o-y on the back of a 20% drop in CPO prices and a 13% decline in FFB production. Going forward, we expect earnings to improve, bolstered by rising CPO prices and improvements at its healthcare division. Maintain NEUTRAL, with an unchanged SOP-based fair value of MYR1.04.

• Numbers  in  line.  TDM’s  FY13  net  profit  was  in  line  with  our expectations,  coming  in  at  96%  of  our  FY13  forecast.  The  company recorded  an  exceptional  gain  of  MYR10.3m  comprising  land compensation, an insurance compensation claim and a gain on fair value changes on derivatives. No dividend is proposed for the quarter, which is surprising (vs our projected 1.1 sen and FY12’s 4.4 sen). We believe it is possible that TDM could decide on a dividend quantum later.
• Net profit  down 54% y-o-y.  TDM’s  FY13  core net profit fell 54% y-o-y on the back of a 19% drop  in turnover. This was mainly attributed to a 20% drop in CPO prices and  a  13% decline  in fresh fruit bunches  (FFB) production,  leading  to  a  60%  drop  in  PBT  contributions  from  the plantation division.
• Tweaking forecasts slightly. We tweak our FY14 forecasts by a slight -0.5%,  after  updating  our FY13  numbers,  and  introduce  our  FY15 forecasts.  Our  CPO  price  assumptions  are  MYR2,700/tonne  for  FY14 and MYR2,900/tonne for FY15.
• Maintain NEUTRAL.  Although we believe TDM has long-term potential, its valuations are a bit rich at this juncture, given our projection that a big earnings  jump  would  only  materialise  in  FY16/17  when  its  Indonesian plantations  start  to  contribute  more  significantly.  On  an  EV/planted  ha basis,  TDM’s  MYR26,000-28,000/ha  (USD8,000-9,000/ha)  valuations are  inexpensive  compared  with  its  Malaysian  peers’  MYR35,000-55,000/ha  (USD11,000-17,000/ha),  and  its  Indonesian  peers’ USD18,000-22,000/ha.  We  maintain  our  MYR1.04  SOP-based  TP, attributing  unchanged  FY14  P/Es  of  16x  and  20x  to  its  plantation  and healthcare divisions respectively. Maintain NEUTRAL.

Financial Exhibits

SWOT Analysis

Company Profile
TDM’s  two main divisions  are  palm oil plantations and healthcare. It has a total landbank of 70,000ha in Malaysia and Indonesia, of which close to 50,000ha has been planted. TDM also operates four medium-sized specialist hospitals in Malaysia.

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Source: RHB