TSH Resources - BUY FV RM2.88

4Q FY2011 Results 

Within expectations. TSH’s FY11 results were in line with consensus and our estimates.  12-month revenues at RM1.148b made up of 96% of our full year target and PBT of RM162.4m almost made up of our full year estimate. For the full year under review, revenues grew 26% while operating profit rose 46% to RM166.9m.  EPS of 14.7sen was lower than its previous year of 20.6sen on an enlarged share capital after its 1:1 bonus issue.  Overall, higher earnings were attributable to higher CPO prices and better FFB production on improved yield management as well as higher mature acreages in Indonesia.  During the year, FFB production increased by 43% to 399,604MT. The Wood products division continue to register a loss on sluggish demand from US and Europe.  The Cocoamanufacturing division reported lower profits on lower production and unfavourable cocoa butter prices.  

On a QoQ basis, despite 7% higher revenues of RM292.9m, the bottomline was lower than in 3Q on the lower CPO prices following the trend in FFB production cycle.  PBT fell 36% to RM30.1m and net profits of RM26.1m was 24% lower than last quarter’s RM34.5m. The lower PBT was also due to provision of doubtful debts in the wood products division. 

Recommendation

We continue to view TSH with favour, as it can bank  on improvements in efficiency in plantation division and higher crop production from its Indonesia estates.  We are introducing our 2013 projections.  We applied a two-stage DDM valuation model for TSH, as we expect high growth in the coming years when more palms come into maturity in Indonesia.  We have tweaked our target price upwards to RM2.88.  BUY recommendation maintained.

Source: Jupiter Securities