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This article first appeared in The Edge Financial Daily on May 25, 2018

TSH Resources Bhd
(May 24, RM1.23)
Maintain neutral with a lower target price of RM1.30:
TSH Resources Bhd’s core net income (CNI) for its first quarter of financial year 2018 (1QFY18) of RM4.7 million was 5%/4% below our/concensus earnings estimates. The weaker-than-expected earnings were due to higher-than-expected costs. In our CNI estimate calculation, we excluded RM11.2 million of foreign exchange gain and RM1.8 million net write-offs. As expected, no dividend was announced.

TSH Resources’ core profit before tax declined 52% year-on-year (y-o-y) to RM17 million. This was caused by a lower crude palm oil (CPO) price (-22% y-o-y to RM2,316 per tonne). Although fresh fruit bunch production improved (+22% y-o-y to 181,219 tonnes), it was not enough to offset the impact of a lower CPO price.

We reduce TSH Resources’ FY18 CNI estimate by 10% to RM80.6 million. We also reduce FY19 CNI estimate by 10% to RM86.8 million. We increase our cost assumption.

Our TP has been lowered to RM1.30 (previously RM1.45) in line with a lower core earnings per share assumption for FY18. Valuation method is unchanged by using 22.3 times forward price-earnings ratio which reflects mean valuation. We maintain “neutral” call on TSH Resources due to its unexciting earnings outlook in the near term. — MIDF Research, May 24

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