• Maintain HOLD (TP: RM1.26) TSH Resources Bhd (TSH) 9MFY24 core PATAMI of RM86.8mn came in above our and consensus full year forecast, accounting for 89% and 85%, respectively. The group 9MFY24 core PBT of RM136.4mn rose by +14% YoY despite recording lower revenue (-10% YoY), primarily due to lower corporate expenses and finance costs, coupled with increased profit contributions from associates and JV. The palm products segment was impacted by lower FFB production (-14% YoY), despite improved CPO and PK realised ASP. Despite the challenging business environment that could affect its plantation segment, we anticipate a better earnings growth in the upcoming quarters, supported by higher expected CPO prices. Accordingly, we have revised our FY24/FY25 earnings forecasts upward by 25%/30% respectively, incorporating a higher CPO price assumption of RM4,100/tonne and increase our margins estimate. We maintain our HOLD call on TSH, with a higher TP of RM1.26 (from RM1.10); based on P/BV of 0.78x pegged to FY25F BV/share of RM1.61.

• Key highlights. TSH’s 3QFY24’s revenue and core PBT declined to RM231.9mn (-8% QoQ, -22% YoY) and RM45.7mn (-14% QoQ, -19% YoY) respectively, primarily due to weaker performance of the palm products segment. The dropped in profitability growth of palm products segment to RM55.81mn (-6% QoQ, -22% YoY), was driven by lower CPO sales volume, despite registered higher realised CPO average selling prices of RM3,683/mt (+9% YoY) and PK of RM2,485/mt (+49% YoY). Notably, slower FFB production (-28% YoY) and CPO sales volume (-33% YoY) were impacted by natural biological yield cycles and slower production tends in Indonesia.

• Earnings Revision. We have raised our FY24/FY25 earnings forecasts by 25%/30% respectively, after factoring in higher CPO prices assumption of RM4,100/tonne, increase margin estimates and housekeeping adjustments.

• Outlook. TSH's performance has been relatively stable despite challenges, including reduced FFB production and the impacted by Indonesia's Export Levy and Duty charges on CPO exports. Moving forward, we anticipate better earnings growth in the upcoming quarters, driven by expected higher CPO prices.

Source: BIMB Securities Research - 22 Nov 2024