MARKET DEVELOPMENT
TSH Resources has Come A Long Way from Humble Beginnings
TSH Resources has Come A Long Way from Humble Beginnings
Tan: ‘What we have is just sheer hard work and the ongoing desire to continuously push down our production costs.’
22/11/2014 (The Star) - MID-tier plantation group TSH Resources Bhd has come a long way to attain the number one spot as the country’s most efficient oil palm planter, and possibly, among the best in the South-East Asia region.
Its estates in Sabah currently hold a track record of average fresh fruit bunches (FFB) yield at 30 tonnes per hectare from 2011 to 2013, much higher than the industry’s FFB average of 19 tonnes per ha, which has remained stagnant for over a decade.
It is also not an easy feat for a 17-year old plantation company from its humble beginnings in cocoa, to be the lowest cost producer of crude palm oil (CPO) in the country amidst the current increasing cost challenges.
Given its three-year CPO average costs of production at RM830 per tonne, TSH Resources has easily overtaken other well experienced plantation big boys such as Kuala Lumpur Kepong Bhd, IOI Corp Bhd and United Plantations Bhd, according to plantation analysts.
On average, the cost of production among oil palm planters in Peninsula Malaysia is about RM1,200 to RM1,300 per tonne while in Sabah and Sarawak, it varies between RM1,200 and RM1,500 per tonne.
According to low-profile TSH Resources chairman Datuk Kelvin Tan Aik Pen, there is no magic formula to TSH Resources’ success in attaining a high FFB yield in a cost-efficient environment, the two key benchmarks closely monitored by plantation players.
“What we have is just sheer hard work and the ongoing desire to continuously push down our production costs. “Moving forward, TSH Resources wants to step up on its current FFB yield and manage cost controls efficiently,” explains Tan.
He says that TSH Resources is also thankful for having the foresight to invest in the superior planting material - Wakuba - some 11 years ago.
“Our Wakuba high-yielding ramets will help to spur further growth in our yield per ha to a significantly higher level than the industry’s average in the coming years.”
Hence, Tan expects TSH Resources’ potential FFB yield can be increased to about 35 tonnes per ha within the next five to seven years as “82% of our plantations comprising immature and young immature trees are progressing well into higher yield age particularly in our estates in Kalimantan.”
The higher FFB yield going forward will also help to bring down the company’s production costs, says Tan adding that its FFB production grew 26% to 164,000 tonnes in the third quarter of 2014 from 129,778 tonnes in the same quarter last year.
He also envisages that TSH Resources’ CPO production costs (ex-estate, excluding kernel) can come down further to about RM700 per tonne of CPO within the next five years.
TSH Resources currently has landbank consisting 65,000ha of unplanted areas as well as 50,000ha of planted areas
According to Tan, TSH Resources is fully committed to undertake new planting activities between 4,000ha and 5,000ha annually. In 2013, the group planted 4,200ha inclusive of those under the Plasma Development Programme in Kalimantan.
“We will also be on the look out for greenfield land either in Sabah and Kalimantan and acquire them if the opportunity arises,” he adds.
Analysts say TSH Resources is believed to be in the midst of looking out for sizable plantation land in Tawau, Sabah.
Tan, who used to be disheartened over the low coverage on TSH Resources stock back in mid-2000, despite its strong track record and quality sustainable earnings, is now happy with the more balanced coverage initiated on TSH Resources by plantation analysts currently.
Within the next five years, he also hopes the company’s promising growth will significantly enhance the market capitalisation from the current RM3bil.
“We will be very comfortable once we have grown into a sizeable plantation outfit but still focus on being a high yield and low cost producer of CPO,” Tan points out.
Meanwhile, analysts are generally mixed on TSH Resources’s newly released third quarter results ended Sept 30.
The group posted a 16.2% jump in core operating profit to RM40.1mil for the quarter under review from RM34.5mil a year earlier. Revenue rose to 12% to RM246.9mil from RM220.5mil bringing the current year to date revenue to RM835.9mil.
HLIB Research in its latest report has a “hold” recommendation of the stock, saying that it continues to like TSH Resources for its young tree profile which indicates strong FFB output growth going forward.
However, the research unit sees limited upside potential to its share price given the weak CPO price sentiment as TSH Resources’ earnings have relatively high sensitivity to CPO price changes.
The positive side to TSH Resources includes its strong FFB output growth, stable cash flow from its alternative power plant and favourable long term outlook in the palm oil business.
Kenanga Research, meanwhile, has a “market perform” call on TSH Resources. The research unit in its latest report says the good results of TSH Resources are mainly driven by stronger FFB production growth which offsets the weak CPO selling prices. Nevertheless, Kenanga expects weaker results in the last quarter in anticipation of weaker CPO selling prices.
22/11/2014 (The Star) - MID-tier plantation group TSH Resources Bhd has come a long way to attain the number one spot as the country’s most efficient oil palm planter, and possibly, among the best in the South-East Asia region.
Its estates in Sabah currently hold a track record of average fresh fruit bunches (FFB) yield at 30 tonnes per hectare from 2011 to 2013, much higher than the industry’s FFB average of 19 tonnes per ha, which has remained stagnant for over a decade.
It is also not an easy feat for a 17-year old plantation company from its humble beginnings in cocoa, to be the lowest cost producer of crude palm oil (CPO) in the country amidst the current increasing cost challenges.
Given its three-year CPO average costs of production at RM830 per tonne, TSH Resources has easily overtaken other well experienced plantation big boys such as Kuala Lumpur Kepong Bhd, IOI Corp Bhd and United Plantations Bhd, according to plantation analysts.
On average, the cost of production among oil palm planters in Peninsula Malaysia is about RM1,200 to RM1,300 per tonne while in Sabah and Sarawak, it varies between RM1,200 and RM1,500 per tonne.
According to low-profile TSH Resources chairman Datuk Kelvin Tan Aik Pen, there is no magic formula to TSH Resources’ success in attaining a high FFB yield in a cost-efficient environment, the two key benchmarks closely monitored by plantation players.
“What we have is just sheer hard work and the ongoing desire to continuously push down our production costs. “Moving forward, TSH Resources wants to step up on its current FFB yield and manage cost controls efficiently,” explains Tan.
He says that TSH Resources is also thankful for having the foresight to invest in the superior planting material - Wakuba - some 11 years ago.
“Our Wakuba high-yielding ramets will help to spur further growth in our yield per ha to a significantly higher level than the industry’s average in the coming years.”
Hence, Tan expects TSH Resources’ potential FFB yield can be increased to about 35 tonnes per ha within the next five to seven years as “82% of our plantations comprising immature and young immature trees are progressing well into higher yield age particularly in our estates in Kalimantan.”
The higher FFB yield going forward will also help to bring down the company’s production costs, says Tan adding that its FFB production grew 26% to 164,000 tonnes in the third quarter of 2014 from 129,778 tonnes in the same quarter last year.
He also envisages that TSH Resources’ CPO production costs (ex-estate, excluding kernel) can come down further to about RM700 per tonne of CPO within the next five years.
TSH Resources currently has landbank consisting 65,000ha of unplanted areas as well as 50,000ha of planted areas
According to Tan, TSH Resources is fully committed to undertake new planting activities between 4,000ha and 5,000ha annually. In 2013, the group planted 4,200ha inclusive of those under the Plasma Development Programme in Kalimantan.
“We will also be on the look out for greenfield land either in Sabah and Kalimantan and acquire them if the opportunity arises,” he adds.
Analysts say TSH Resources is believed to be in the midst of looking out for sizable plantation land in Tawau, Sabah.
Tan, who used to be disheartened over the low coverage on TSH Resources stock back in mid-2000, despite its strong track record and quality sustainable earnings, is now happy with the more balanced coverage initiated on TSH Resources by plantation analysts currently.
Within the next five years, he also hopes the company’s promising growth will significantly enhance the market capitalisation from the current RM3bil.
“We will be very comfortable once we have grown into a sizeable plantation outfit but still focus on being a high yield and low cost producer of CPO,” Tan points out.
Meanwhile, analysts are generally mixed on TSH Resources’s newly released third quarter results ended Sept 30.
The group posted a 16.2% jump in core operating profit to RM40.1mil for the quarter under review from RM34.5mil a year earlier. Revenue rose to 12% to RM246.9mil from RM220.5mil bringing the current year to date revenue to RM835.9mil.
HLIB Research in its latest report has a “hold” recommendation of the stock, saying that it continues to like TSH Resources for its young tree profile which indicates strong FFB output growth going forward.
However, the research unit sees limited upside potential to its share price given the weak CPO price sentiment as TSH Resources’ earnings have relatively high sensitivity to CPO price changes.
The positive side to TSH Resources includes its strong FFB output growth, stable cash flow from its alternative power plant and favourable long term outlook in the palm oil business.
Kenanga Research, meanwhile, has a “market perform” call on TSH Resources. The research unit in its latest report says the good results of TSH Resources are mainly driven by stronger FFB production growth which offsets the weak CPO selling prices. Nevertheless, Kenanga expects weaker results in the last quarter in anticipation of weaker CPO selling prices.