TSH Resources’ FY13 core earnings were in line with our forecast  but beat  consensus  estimate.  We  continue  to  like  the  company’s  age profile, which is supportive of production growth and earnings delivery. TSH also has plenty of room for further new planting. However,  as  the stock  is  trading  near  our  SOP-based  FV  of MYR3.19,  we  maintain  our NEUTRAL call. We suggest accumulating TSH only at lower price levels.

• Beating consensus estimates. Stripping out the exceptional gains from disposals  and  forex  losses,  TSH’s  core  earnings  beat  consensus’expectations but were in line with our forecast. The company had a good FY13,  getting  a  boost  during  the  early  part  of  the  year  from  drawing down inventory built up at end-FY12.
• Production numbers ahead of our forecast. TSH’s fresh fruit bunches (FFB)  production came in at 539.4k tonnes, beating our forecast of  495k tonnes.  The  higher  production  helped  to  mitigate  the  weaker  palm  oil price.
• Wood  products  segment.  The  wood  products  segment,  which  is  the Ekowood  flooring business,  saw revenue jump  19%. This resulted in  a MYR1.5m profit compared with a MYR1.7m loss in FY12. We believe the turnaround  may give rise to the potential  sale of Ekowood in the not-sodistant future, as the sale has been held back by depressed conditions in the flooring business, which is traditionally dependent on Europe.
• FV  maintained  at  MYR3.19.  No  change  to  our  FV.  At  current  levels, TSH is  trading  at 17x FY14 and 14x FY15 earnings. There will be some upside to the stock when we roll over  our  valuation horizon in another quarter.
• Prefer  SOP  and  Jaya  Tiasa.  For  mid-cap  plantation  growth  stocks  in Malaysia, we prefer  Sarawak Oil Palms (SOP MK,  BUY, FV:  MYR7.04) and Jaya Tiasa (JT MK, BUY, FV:  MYR2.80).  Both stocks are trading  at more compelling valuations compared with TSH.

Financial Exhibits

SWOT Analysis

Company Profile
TSH is involved in oil palm plantations in Sabah and Indonesia. It is also involved in the refining business in a joint venture with Wilmar International.

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Source: RHB