The research house said the fair value was based on the retention of its FY10 earnings per share (EPS) of 16.9 sen and a price-earnings ratio (PER) of eight times.

“Inter-Pacific projects average crude palm oil (CPO) price for FY09 and FY10 to be at RM2,212 and RM2,500 per tonne, respectively,” it said in a research note yesterday.

Inter-Pacific Research said TWP continued to register losses for the second consecutive quarter.

From a net loss of RM9.4 million in 1QFY09, TWP posted a lower net loss of RM1.7 million. Thus, for 1HFY09 TWP’s cumulative net losses stood at RM10.3 million.

Inter-Pacific Research said the continued bleeding was due to high operating cost and losses from jointly-controlled entities, as well as lower CPO prices. Average CPO price in FY09 was RM2,212, which was 57.3% lower year-on-year (y-o-y), while average cost per tonne rose by 4.8% y-o-y to RM2,631 in 1HFY09.

Quarter-on-quarter (q-o-q) revenue and net profit improved from better CPO production and higher average price. CPO production improved by 2.3% q-o-q to 52,300 tonnes, while average CPO selling price rose by 31.6% to RM2,514 per tonne. Operating expenses rose by 3.9% to RM140.3 million.

Inter-Pacific Research said losses from their jointly-controlled entity continued to hurt the bottom line, but less severe when compared q-o-q, improving by 15.6% to RM7.2 million.

The research house said the periodic upgrading and installation of the latest milling technology in TWP’s palm oil mill had started to yield some positive effect as oil extraction rate (OER) improved from 19.2% in 1HFY08 to 20.5% in 1HFY09.  “In view of the better OER, TWP’s CPO production rose 7.2% to 103,359 tonnes as opposed to a stagnant growth in fresh fruit bunch (FFB) production of 503,308 tonnes.”

This article appeared in The Edge Financial Daily, August 25, 2009.