- We maintain our BUY recommendation on TH Plantations (THP),
as the issue of share overhang and EPS dilution have been discounted by the
market. Our fair value of RM2.20/share implies an FY13F PE of 15.6x.
- THP’s FY12 core net profit of an estimated RM67mil to RM72mil
was within our expectations and consensus estimates.
- THP showed an operational improvement in 4QFY12 after a disappointing
9MFY12. The group’s gross profit margin was sustained at 30.5% QoQ in 4QFY12.
- THP benefited from the acquisition of TH Ladang (Sabah and
Sarawak), which was completed in 4QFY12.
- As a result, the 44.2% expansion in FFB production helped compensate
for a 27.9% QoQ decline in the average CPO price realised in 4QFY12.
- On the whole, THP’s FFB production inched up 2.2% to 524,665
tonnes in FY12 compared to FY11.
- The group realised an average CPO price of RM2,661/tonne in
FY12, 14.1% lower than the average price of RM3,096/tonne recorded in FY11.
- Like its plantation peers, THP suffered erosions in operating
margins in FY12 due to higher fertiliser and labour costs.
- We also believe that THP’s margins were squeezed by the portion
of its FFB being sold to third party mills instead of being milled internally.
This is because the group does not have any palm oil mill in Sarawak yet.
- THP’s gross profit margin slid from 45.6% in FY11 to 29.8%
in FY12.
- The effective tax rate fell from 18.2% in FY11 to 9.9% in FY12
due to a reversal of over-provisioning of taxes in previous years.
- THP has declared a final gross DPS of 1 sen for 4QFY12. This
brings the total gross DPS to 4.6 sen for FY12, which translates into a yield
of 2.3%.
Source: AmeSecurities
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