TSH’s 1QFY24 results met forecast but disappointed the market notes Kenanga, while its FFB output and average CPO price realised were flattish. Its 1QFY24 core net profit surged multiple times YoY from a low base last year. The house said it fine-tuned down its FY24-25F net profit forecasts by 4% and 1%, respectively, but keeps TP of RM1.30 and OUTPERFORM call.
The group’s 1QFY24 core net profit of RM22.4m (-18% QoQ, +526% YoY) met expectation at 24% of full-year forecast but disappointed the market at only 19% of the full-year consensus estimate. The core net profit excluded: (a) fair value loss (RM1.4m), (b) unrealised foreign exchange loss (RM1.3m), and (c) assets impairment along with insurance claims (RM0.4m). As expected, no dividend was declared for 1QFY24.
Looking ahead, Kenanga is of view the earnings are likely to remain firm over FY24-25 on relatively steady CPO prices while production cost eases. CPO prices are expected to stay rangebound, between RM3,500-4,000 per MT over FY24-25 as global edible oil demand is expected to grow at 3%- 4% YoY while supply outlook may struggle to match; thus, inventory is
expected to stay flat or even dip slightly in 2024 and possibly into midCY25. Average CPO prices of RM3,800 per MT is expected for the sector but TSH should average closer to RM3,400 as most of its crops are from Indonesia where CPO prices are lower due to levies and duties. Input costs such as fertiliser and fuel have been easing since mid-CY22 but could be bottoming of late. However, palm kernel (PK) prices could be picking up, helping to reduce CPO cost pressures than a year ago.
In Jun 2022, TSH sold 13,898 Ha of plantation land (72% unplanted) located in NE Kalimantan for RM731m cash on a
staggered basis. Thus far it has received RM457m with the balance due his year. Compounded with other divestments and operating cashflow, TSH’s net debt fell significantly, from RM816m at the start of FY22 to RM48m (2% net gearing) at end-1QFY24. More importantly, TSH has already set up the nursery and team to plant 8k-10k Ha or expand its planted oil palm area by 20%-25% over the next 2-3 years.
