September 4, 2014
Company Name: TSH RESOURCES BHD
|Research House: MAYBANK||Price Call: BUY||Target Price: 3.70|
MAYBANK Investment Bank (Maybank IB) has revised upwards TSH Resources Bhd's valuation to "buy" from "hold" after the company's first-half performance outperformed the investment bank's expectation.
The bank also increased TSH's target price to RM3.70 from RM3.40 previously.
Maybank IB said TSH's second quarter core net profit surged 107 per cent to RM45 million year-on-year (YoY), bringing the first half core net profit to RM85 million or 59 per cent of the bank's full-year estimates.
The bank said the better-than-expected performance was mainly attributed to lower-than-expected cost of production per tonne and above expectation fresh fruit bunches (FFB) output (up four per cent quarter-on-quarter and 34 per cent YoY), driven by its young Indonesian estates.
Also contributing to the better results was the lower-than-expected tax expense due to tax incentives in respect of its pioneer and bionexus status, it said.
Maybank IB said TSH's first half FFB output growth of 28 per cent YoY was significantly above the bank's 2014 growth forecast of 20 per cent.
"Buoyed by its young tree age profile, TSH will deliver strong double-digit production growth, buffering weakness in crude palm oil price," it said. Bernama