- Maintain
BUY on TSH Resources Bhd, with a higher fair value of RM2.66/share versus
RM2.60/share previously. Our fair value is based on a PE of 15x on FY13F EPS.
- Our
recent visit to TSH’s oil palm estates in Kalimantan affirms our positive
stance on the group.
- We
forecast the group’s net profit to improve 11% each to RM132mil in FY12F and
RM146mil in FY13F underpinned by expansions in FFB production.
- After a
robust 43% climb in FFB production growth in FY11, we reckon that TSH would be
able to maintain a double-digit percentage increase in palm oil production going
forward, albeit at a slower pace.
- We
estimate FFB production growth of 17% for FY12F and 15% for FY13F underpinned
by increases in mature areas.
- As the
volume of TSH’s palm oil production in Indonesia increases, production costs
per tonne are expected to decline. Although the plantation operations in
Malaysia are efficient, group production costs are high due to the Indonesian
operations.
- We
estimate operating cost of the Indonesia division at RM1,415/tonne in 1QFY12.
In comparison, production cost of the operations in Malaysia was about
RM1,161/tonne.
- The age
profile of TSH’s oil palm trees is attractive. TSH has a large proportion of
young trees in Indonesia. About 56% of the trees in Indonesia are three years
old and less, while another 30% of the trees are between four and six years
old.
- A small
5% of the oil palm trees in Indonesia are between seven and 15 years old, while
the balance 9% of the trees are aged more than 16 years.
- We expect
insignificant earnings contributions from the wood and cocoa divisions. Cocoa
division is envisaged to break even in FY12F against an EBITDA of RM24.4mil in FY11.
- Losses in
the wood division are expected to widen from RM0.6mil in FY11 to RM3mil in
FY12F due to poor demand from Europe. Ekowood Bhd, which carries out operations
in the wood division, is currently trading at 0.3x of its book value of
RM0.75/share.
Source: AmeSecurities
No comments:
Post a Comment