KUCHING: TSH Resources Bhd’s (TSH) earnings outlook have garnered positive views from analysts, on the back of higher crude palm oil (CPO) prices.
According to the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), the elevated CPO price and resilient fresh fruit bunch (FFB) output in financial year 2020 (FY20) are expected to drive the group’s earnings momentum.
“In view of the expected elevated CPO price in current year 2020 (CY20), we remain buoyant on the group’s earnings outlook moving forward, particularly from its palm division,” MIDF Research said.
The research arm noted that the palm products segment accounts for approximately 86 per cent of the group’s total revenue and will remain as the key earnings contributor.
“The group’s FFB production also likely remain consistent as it continues to maintain its commitment in diligently carrying out the fertiliser application, which will inadvertently lead to a better FFB yield.
“These would translates into positive developments to the group’s earnings momentum in the upcoming quarters.
“Nonetheless, the ongoing Covid-19 outbreak and tough geopolitical fronts might possibly dampen demand and hence putting a downward pressure on CPO price.”
Premised on higher CPO prices, the research arm of Kenanga Investment Bank Bhd (Kenanga Research) expected to see sequential earnings improvement in the first quarter of FY20 (1QFY20).
“Meanwhile, we understand that circa 4,000 hectares (Ha) of palms are coming into maturity and despite industry-wide expectations of weaker production in FY20 (arising from dry weather impact, lower fertiliser application and replanting), management expects sturdy FY20 FFB growth of eight to 12 per cent,” Kenanga Research noted.
By imputing a wider discount (up five per cent) on TSH’s realised CPO price, the research arm reduced its FY20E core net profit for TSH by 16 per cent to RM89.6 million.
It also introduced FY21E core net profit of RM95.3 million on FY21E FFB growth (up four per cent).
On the other hand, MIDF Research maintained its earnings forecasts for FY20 and FY21 while also introducing its new set of forecasts for FY22.
MIDF Research’s normalised profit after tax and non-controlling interest (PATANCI) for FY20, FY21 and FY22 thus amounted to RM71.6 million, RM97.4 million and RM109 million, respectively.