Stock Name: THPLANT
Company Name: TH PLANTATIONS BHD
Research House: MIDF
TH Plantations Bhd (THP)
(April 27, RM1.61)
Maintain buy at RM1.58 with target price of RM2: THP's 1QFY10 (financial year-end Dec 31) net profit of RM17.8 million is equivalent to 20% of our full-year estimate (25% of consensus).
The number is slightly below our expectation as the "low season" quarter of end-March generally contributes around 22% of the full-year figure.
Higher-than-average shortfall in output contributed to the slight underperformance. Revenue was higher by 29% year-on-year (y-o-y) to RM77.2 million and net profit jumped by 112% y-o-y. Higher product prices contributed to better top and bottom lines performance despite lower sales volume.
For the top line, there were higher crude palm oil (CPO) and palm kernel prices as compared to the corresponding quarter last year.
The improvement in the topline figure was achieved despite lower sales volume as fresh fruit bunch production dropped by more than 10% to 108,695 tonnes in 1Q10 vis-à-vis 121,460 tonnes in 1Q09. The double-digit drop in THP output was in contrast to the almost 2% rise in national output during the quarter ended March 2010.
In 1QFY10, net profit was significantly higher by 112% to RM17.8 million as compared to RM8.4 million for the same quarter last year. Operating margin rose to 38%, a marked increase of more than 13 percentage points over that in 1QFY09.
Cost of sales was up by only 6% while revenue shot up by 29%. The big improvement in operating margin was mainly a result of better product prices.
We maintain our buy recommendation with a target price of RM2. We expect CPO prices to remain on an upward secular trend despite intermittent volatilities, for as long as the general bullishness in the world's commodities market continues.
We reiterate our mean CPO price targets of RM2,450 per tonne and RM2,650 for 2010 and 2011 respectively. Moreover, THP's relatively low leverage position provides room for further growth via debt-funded acquisitions.
The target price of RM2 is based on FY10 earnings of 11.2 times, which is equivalent to the mean historical price-to-earnings (PE) ratio of THP. - MIDF Research, April 27
This article appeared in The Edge Financial Daily, April 27, 2010.
Company Name: TH PLANTATIONS BHD
Research House: MIDF
TH Plantations Bhd (THP)
(April 27, RM1.61)
Maintain buy at RM1.58 with target price of RM2: THP's 1QFY10 (financial year-end Dec 31) net profit of RM17.8 million is equivalent to 20% of our full-year estimate (25% of consensus).
The number is slightly below our expectation as the "low season" quarter of end-March generally contributes around 22% of the full-year figure.
Higher-than-average shortfall in output contributed to the slight underperformance. Revenue was higher by 29% year-on-year (y-o-y) to RM77.2 million and net profit jumped by 112% y-o-y. Higher product prices contributed to better top and bottom lines performance despite lower sales volume.
For the top line, there were higher crude palm oil (CPO) and palm kernel prices as compared to the corresponding quarter last year.
The improvement in the topline figure was achieved despite lower sales volume as fresh fruit bunch production dropped by more than 10% to 108,695 tonnes in 1Q10 vis-à-vis 121,460 tonnes in 1Q09. The double-digit drop in THP output was in contrast to the almost 2% rise in national output during the quarter ended March 2010.
In 1QFY10, net profit was significantly higher by 112% to RM17.8 million as compared to RM8.4 million for the same quarter last year. Operating margin rose to 38%, a marked increase of more than 13 percentage points over that in 1QFY09.
Cost of sales was up by only 6% while revenue shot up by 29%. The big improvement in operating margin was mainly a result of better product prices.
We maintain our buy recommendation with a target price of RM2. We expect CPO prices to remain on an upward secular trend despite intermittent volatilities, for as long as the general bullishness in the world's commodities market continues.
We reiterate our mean CPO price targets of RM2,450 per tonne and RM2,650 for 2010 and 2011 respectively. Moreover, THP's relatively low leverage position provides room for further growth via debt-funded acquisitions.
The target price of RM2 is based on FY10 earnings of 11.2 times, which is equivalent to the mean historical price-to-earnings (PE) ratio of THP. - MIDF Research, April 27
This article appeared in The Edge Financial Daily, April 27, 2010.
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