• TSH Resources - one of Malaysia’s leading plantation groups – made its debut on SGX through a secondary listing. With an established market capitalization of S$405.7 million (MYR 1.3­­­9 billion), the company primarily engages in the cultivation and of fresh fruit bunches (FFB) into crude palm oil (CPO) and palm kernel (PK).
   
• Through its secondary listing, TSH is aiming to strengthen its presence in Singapore and garner interest from investors and traders worldwide with higher visibility. As at 31 December 2022, approximately 65.6% of TSH’s revenue was derived from customers located outside of Malaysia, and approximately 56.5% of the Group’s non-current assets were located outside of Malaysia.
   
• Malaysia, which produces more than 20% of the world’s palm oil, forecast crude palm oil prices could rise above MYR4,300 (S$1,251.92) a metric ton in 2024 – about a 17% jump from current prices after palm oil futures dipped to a nearly three month-low. India and China will import a combined total of 16.5 million tonnes of palm oil by December 2023, a 10% jump from a year earlier, the MPOC predicted.

TSH Resources - one of Malaysia’s leading plantation groups - made its debut on SGX through a secondary listing. With an established market capitalization of S$405.7 million (MYR 1.39 billion), the company primarily engages in the cultivation and of fresh fruit bunches (FFB) into crude palm oil (CPO) and palm kernel (PK).

The latest listing brings the total number of agrifood companies listed on the SGX with a market cap roughly above S$400 million to 15 – amounting to a combined market cap of about S$40.4 billion.

TSH Resources is a producer of Crude Palm Oil and Palm Kernel, with its oil palm plantations located in Malaysia and Indonesia. It is principally engaged in cultivating oil palm trees, harvesting FFB from its oil palm plantations and processing FFB into CPO and PK for sale in Malaysia and Indonesia.

Its operations are located in Sabah, Malaysia and East Kalimantan, Central Kalimantan, North Kalimantan and West Sumatera in Indonesia, where it has a total oil palm planted area of 39,071 Ha and six palm oil mills, comprising two in Sabah, Malaysia and four in Indonesia. In addition, the company also engages in the other business segment which is comprised of the wood division and the bio-integration division.

Climbing Palm Oil Prices Ahead

Malaysian Palm Oil Council (MPOC) forecast crude palm oil prices could rise above MYR4,300 (S$1,251.92) a metric ton after trading within a range of MYR3,700 to MYR4,200 in the latter half of the year.

MPOC also forecasts India and China will import a combined total of 16.5 million tonnes of palm oil by December 2023, a 10% jump from a year earlier, with ASEAN and MENA regions also seeing higher demand for the commodity.

Other key factors for CPO prices’ outlook include elevated inventories of edible oils, especially from China and India, the price competitiveness of palm oil against other vegetable oils, and Indonesia’s increased palm oil production – which jumped 16% from the Jan-June 2023 period compared to the same period in 2022. Impacts from El Nino and China’s economic fragility are also significant factors that will shape the crude palm oil market going forward.

Over the next few years, the company plans to develop and cultivate its existing land bank and increase its cultivated oil palm plantation land by another 7,000 to 10,000 Ha. The company is also looking to acquire existing oil palm plantation estates and plantation reserve land in Malaysia and Indonesia if suitable opportunities arise.

The company is expecting to improve its oil extraction rates with the expansion of its oil palm plantations. This would mean the duration of handling and transportation of the FFB to its palm oil mills will be reduced, and the company puts into place quality control procedures to reduce oil loss during transportation from its oil palm plantations to its palm oil mills and at its palm oil mills during the extraction process.

Source:  TSH Resources Introductory Document

A Singapore Presence

TSH expects to strengthen its presence in Singapore through its secondary listing on SGX, which may attract wider research coverage and greater attention from international investors and traders who invest in securities listed in Singapore, as well as generate higher visibility.

As at 31 December 2022, approximately 65.6% of TSH’s revenue was derived from customers located outside of Malaysia, and approximately 56.5% of the Group’s non-current assets were located outside of Malaysia. TSH Resources’ Secondary Listing on the SGX-ST is expected to bode well for the Group’s corporate image in relation to its dealings with international business partners.

Out of the 640 companies listed on SGX, 27 stocks are secondary listings on the Main Board of SGX-ST, with a total market capitalisation of S$176.5 billion. Of the 640 companies listed on the SGX-ST, 222 or 34.7% are foreign companies with a total market capitalisation of S$282.0 billion. The turnover value for foreign companies (for the month of June 2023) was S$5.2 billion.

Highlights of the listing based on the Introductory Document

1. Competitive Strengths (refer to pg.102)

• A highly experienced and strong management team
• Well-positioned to benefit from established business relations and growth in the global edible oils market.
• Its strong sustainability initiatives and commitment to its sustainability efforts
• TSH Resources’ oil palm plantations with an age profile that supports increased production.
• The company has land bank with new planting potential, supported by a strong balance sheet with low gearing.
  • As at 31 December 2022, the company has an estimated land bank of approximately 76,400 Ha in Malaysia and Indonesia – its planted area covers approximately 51.1% of the estimated land bank as at 31 December 2022

2. Business Strategies

• Expansion of its oil palm plantation assets
• Build and leverage on its sustainability credentials
• Improve production and operational efficiencies, such as automate and refine operations at oil palm plantations through technology

3. Key Risk Factors (refer to pg.30)

• Fluctuations is commodity prices and raw material prices
• Production and supply of FFB prone to be adversely affected by weather conditions, natural disasters and other factors
• Export and import taxes, levies, policies, tariffs and other price control measures
• The company is subject to customer concentration risk: The Wilmar Group accounted for approximately 49.5% respectively, and 55.6% of its total revenue 1Q2023 (which excludes transactions with JV TSH-Wilmar).
• The company faces uncertainty over its land titles from the Indonesian government, may not be able to maintain the ownership of its existing lands, and is subject to the conditions of the jurisdictions that it operates in.
• The Company may not be able to pay dividends

NOTE: TSH-Wilmar is a joint venture company of the company under a 50:50 joint venture between TSH Resources and the Wilmar Group. Due to its established and business relationships with the various companies within the Wilmar Group, it expects the revenue generated from the Wilmar Group will continue to comprise a significant portion of its revenue in the foreseeable future.

4. Financials (Based on its consolidated statements of comprehensive income)

• Revenue for Q2FY2023 was at MYR256.6 million (S$75 million), higher than Q1FY2023’s revenue of MYR250.3 million, thanks to higher revenue from the Palm Products segment and a result of seasonally higher FFB production as well as higher volume of CPI and PK sales. Revenue for the six months period ended 30 June 2023 was at MYR506.9 million. Both figures were a decrease compared to the same period a year ago due to significantly lower average Crude Palm Oil prices and Palm Kernal prices. (Source: Consolidated Income Statement, Aug 2023: https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=3378606
• THS Resources also saw a higher core profit of MYR34.5 million for Q2FY2023 from Q1FY2023’s profit of MYR30.8 million, in line with higher profit contribution from the Palm Products segment. The group’s overall quarterly profit attributable came in at MYR10.6 million for the three months period ended 30 June 2023. Year-to-date, net profit came in at MYR40 million – the two latter figures representing a steep decline year-on-year.
• While the company expects CPO prices to maintain at current levels – influenced by a surge in export and a widening discount with soybean oil from the disruption of sunflower oil – it remains optimistic on the long-term prospect of the palm oil industry, underpinned by its strong financial position as it aims to raise the planted hectarage to maintain production growth.
• The company expects such uncertainties regarding conditions related to supply and demand, such as weather conditions, export outlook for India and China as well as geopolitical tensions – to continue influencing the price of CPO for the remainder of the year.

Sustainability an integral part of TSH’s business

TSH Resources has integrated sustainability principles into their day-to-day operations and implemented several initiatives to build a solid basis for its sustainability efforts, including conducting a gap analysis with reference to the Global Reporting Initiative standards, the FTSE4Good Index series and the Task Force on Climate-Related Financial Disclosures recommendations in to ensure the company’s current standing against the benchmarks.

Did you know?

TSH Resources has achieved Malaysian Sustainable Palm Oil (MSPO) certification for all oil palm plantations and palm oil mills that it currently operates in Malaysia and has also made significant progress in respect of RSPO and ISPO certifications. It also operates the first biomass power plant in Sabah, Malaysia that is connected to the grid and has a renewable energy power purchase agreement with Sabah Electricity.

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