Stock Name: TSH
Company Name: TSH RESOURCES BHD
TSH Resources Bhd
(Sept 12, RM3.12)
Maintain buy at RM3.21 with target price of RM4.35: We hosted TSH on a two-day non-deal road show in Singapore recently. TSH highlighted that its large immature estates in Indonesia will be its key earnings driver. In June 2011, 39% of its total planted areas were immature against 53% as at end-December 2010. As these mature progressively over the next five years, we expect fresh fruit bunches (FFB) volume to grow at a three-year compounded annual growth rate (CAGR) of 27%. To accommodate output from its 8,000ha maturing estates in East Kalimantan next year, a new 60 tonne per hour mill will be commissioned there by 1H12.
New plantings in Indonesia were slow due to uncertainty over the deforestation moratorium in 1H11 (only 630ha planted as at June 2011), but we expect its expansion to pick up next year to 3,000ha. TSH continues to acquire greenfields to ensure it has enough landbank for expansion. We understand the group has also implemented the SAP system to ensure effective operations in Indonesia.
TSH recently won approval to plant Malaysian Palm Oil Board (MPOB)-franchised Wakuba ramet (high quality clones) at its Indonesian estates. Initial harvest (as early as year two from planting) from its Sabah trials looks promising. It is planning large-scale planting of Wakuba ramet at its Indonesian estates next year. Under ideal conditions, this clone can achieve oil extraction rate (OER) of up to 26% (versus 21% for conventional seeds), according to MPOB. We estimate a 5% increase in OER could result in additional RM150 million to our FY18 earnings forecast (not imputed, pending actual results).
Within our regional coverage, TSH has the second highest three-year CAGR for FFB output, after JA Wattie. It is a top pick, offering 36% upside to target price. The company bought back 2.4 million shares (0.6% of issued shares) during May and June 2011, signifying the management's confidence in TSH's prospects. ' Hwang DBS Vickers Research, Sept 12
This article appeared in The Edge Financial Daily, September 13, 2011.
Company Name: TSH RESOURCES BHD
| Research House: HWANGDBS | Price Call: BUY | Target Price: 4.35 |
TSH Resources Bhd
(Sept 12, RM3.12)
Maintain buy at RM3.21 with target price of RM4.35: We hosted TSH on a two-day non-deal road show in Singapore recently. TSH highlighted that its large immature estates in Indonesia will be its key earnings driver. In June 2011, 39% of its total planted areas were immature against 53% as at end-December 2010. As these mature progressively over the next five years, we expect fresh fruit bunches (FFB) volume to grow at a three-year compounded annual growth rate (CAGR) of 27%. To accommodate output from its 8,000ha maturing estates in East Kalimantan next year, a new 60 tonne per hour mill will be commissioned there by 1H12.
New plantings in Indonesia were slow due to uncertainty over the deforestation moratorium in 1H11 (only 630ha planted as at June 2011), but we expect its expansion to pick up next year to 3,000ha. TSH continues to acquire greenfields to ensure it has enough landbank for expansion. We understand the group has also implemented the SAP system to ensure effective operations in Indonesia.
TSH recently won approval to plant Malaysian Palm Oil Board (MPOB)-franchised Wakuba ramet (high quality clones) at its Indonesian estates. Initial harvest (as early as year two from planting) from its Sabah trials looks promising. It is planning large-scale planting of Wakuba ramet at its Indonesian estates next year. Under ideal conditions, this clone can achieve oil extraction rate (OER) of up to 26% (versus 21% for conventional seeds), according to MPOB. We estimate a 5% increase in OER could result in additional RM150 million to our FY18 earnings forecast (not imputed, pending actual results).
Within our regional coverage, TSH has the second highest three-year CAGR for FFB output, after JA Wattie. It is a top pick, offering 36% upside to target price. The company bought back 2.4 million shares (0.6% of issued shares) during May and June 2011, signifying the management's confidence in TSH's prospects. ' Hwang DBS Vickers Research, Sept 12
This article appeared in The Edge Financial Daily, September 13, 2011.
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