TH Plantation Berhad (THP)’s overall ESG score is 35 (out of 100),render t being below average.
Maybank Investment Bank Berhad, in a note today (Mac 6), opined that THP needs to do more in terms of data collection, disclosures and commitment towards its sustainability goals, alongside its priority to raise profitability and lower gearing.
Given the lack of catalysts, the stock remains a SELL with an unchanged TP of MYR0.58 based on 0.7x FY24E PBV, its 5Y mean.
Different sustainability challenges
THP has battled with frequent changes at its Board and senior management levels over the past several years, posing a challenge to its sustainability advancement. Also, THP’s focus over the past several years has been on de-leveraging given its substantial net debt of MYR822m and another MYR300m in perpetual sukuk (as at 31 Dec 2023).
For several years now, THP has earmarked more than MYR700m worth of its assets for sale to de-leverage but without much success.
Lacking ESG targets
THP is not a RSPO member but its Malaysian operations are 100% MSPO certified. It has a sustainable palm oil policy announced back in 2020 that broadly tracks industry leaders, with a commitment on “no deforestation, no peat, no exploitation” (NDPE).
However, THP stopped short of making known its medium and long term ESG targets.
ESG disclosure is brief at this point
Over the years, Maybank IB noted that THP has taken many initiatives in making its business ESG friendly. Among others, THP is equipping its mill with a biogas plant, installing solar panels in support of its renewable energy agenda, re-purposing its biomass residue, and has embarked on a 7-year (2022-2029) conservation and restoration project to rehabilitate the degrading forest in Johor.
However, more needs to be done – in addition to making its ESG targets known, THP should publicly make available its ESG data points and metrics to enable the tracking of its ESG progress, Maybank IB added.
