KUALA LUMPUR (Jan 6): Shares in TDM Bhd extended gains today and rose much as seven sen or 9.8% as an analyst is bullish on the prospects of the mid-sized plantation group.

At 4.09pm, the stock narrowed its gain to 76.5 sen, still up 5 sen or 6.99%, after some 10.83 million shares changed hands.

On Monday, TDM closed at 77 sen with just some 502,000 shares traded. Over the past two days, the stock has risen about 12.5%.

In a note to clients yesterday (Jan 5), PublicInvest Research said it expects TDM to register strong earnings growth in the coming years.

"After experiencing fresh fruit bunch (FFB) production falling for four consecutive years, management is expecting to see at least 5% FFB production growth in financial year 2016 (FY16) driven by 5% growth in Terengganu production and contribution of 30,000 to 40,000 metric ton (MT) FFB from Kalimantan," PublicInvest Research's plantation analyst Chong Hoe Leong said.

"On the cost of production, management expects a lower all-in cost of RM1,400–1,500 per MT compared to RM1,500 per MT in FY15 as the installation of sterilizer at existing mills would help to lower the processing cost by 25%," he added.

Chong also noted that TDM has a total planted area of 15,000ha in Kalimantan, of which about 7,000ha is mature area; while on the local front, TDM has been undergoing replanting exercise since 2012 and the group's age profile is 15 years old.

He pointed out TDM will open its first mill in Kalimantan by mid-2016.

"The first 60 MT per hour mill in Kalimantan is scheduled to open by mid-2016. It will absorb about 10%–20% FFB production from its own estates and the remainder will come from external purchases," he added.

On the healthcare segment, Chong noted TDM's Kuala Terengganu Medical Specialist is expected to open by the third quarter of the financial year 2016 with 130 beds, which will increase its total beds from 297 beds to 400 beds.

As such, PublicInvest Research has maintained its 'outperform' call on the company, with an unchanged target price of 83 sen based on a price to earnings ratio of 16 times.

(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)