The research firm foresaw an improving outlook for TSH on the back of stronger crude palm oil (CPO) prices and a recovery in FFB production this year.
KUCHING: TSH Resources Bhd (TSH) is poised to reap higher fresh fruit bunches (FFB) production this year.
The research arm of Public Investment Bank Bhd (PublicInvest Research) in a report yesterday said it expects the plantation company to produce healthy FFB growth of 10-15 per cent in financial year 2017 (FY17) ending December 2017.
The company’s plantation estates in Kalimantan, Indonesia is set to produce double-digit FFB production growth after experiencing a decline in production for two consecutive years.
“For the group’s other plantation estates in Sabah and Sumatra, Indonesia, those estates are expected to see mild recovery in FFB production due to the lagged effect of El Nino in the first half of 2016 (1H16),” it detailled in a note yesterday.
Hence, the research firm foresaw an improving outlook for TSH on the back of stronger crude palm oil (CPO) prices and a recovery in FFB production this year.
On another note, PublicInvest Research expected TSH to register a set of strong financial results for the fourth quarter of 2016 (4Q16).
The financial results – due to be announced by the end of next month – is poised to be supported by strong CPO prices and a recovery in FFB production due to peak production period.
In the meantime, TSH’s 21 per cent-owned associate company, Innoprise Plantations Bhd, a Sabah-based company has registered a profit growth of 46.5 per cent in nine months of 2016.
“Interestingly, Innoprise Plantations’ share price performance was the top performer amongst all the plantation companies on Bursa Malaysia,” it added. “It surged more than 78 per cent over the last three months.
Apart from that, PublicInvest Research expects TSH to conserve more cash to reduce the group’s gearing level.
It believed the company would retain more cash to lower the group’s borrowings in which the gearing stood at 92 per cent.
For FY17, PublicInvest Research gathered that the plantation company will allocate RM70 to RM80 million for capital expenditure on existing immature area.
It noted that there would be limited funds set aside for new planting and replanting activities.
Going forward, PublicInvest Research noted CPO production cost per tonne is expected to be lower as FFB production recovers.
Nevertheless, the research firm opined that the lower cost of production may be partially offset by higher fertiliser cost due to the weaker ringgit and a strong recovery in crude oil prices.
Thus, it forecasts TSH’s all-in production cost of RM1,500-RM1,600 per metric tonne (MT) for its products.
Moreover, the research firm believed the company’s palm oil tree age profile of 7.5 years is a plus point for the group as it signifies that the company is still growing.
As a result, it forecasts that TSH’s oil palm plantation estate mature area will reach close to 40,000 ha by the end of 2017 with an additional new mature area of 3,000 ha in the future.