09/02/2008 (The Star Online), Petaling Jaya - TSH Resources Bhd's palm oil business is set to flourish given the high crude palm oil prices (CPO) and its anticipated strong growth in the production of fresh fruit bunches (FFB). 

This week, CPO prices soared after Indonesian Government indicated its intention to raise export taxes if prices climbed further, raising concerns that supplies would be limited. 

Indonesia is the world's biggest producer of palm oil followed by Malaysia. 

TSH's decision to expand its plantation landbank to Indonesia three years ago is now bearing fruit. 

Revenue contribution from the palm and bio integration business improved by more than 50% to RM396.73mil in the first nine months ended Sept 30, 2007 compared with RM256.76mil in the previous year's corresponding period. 

TSH's earnings per share (EPS) was 16.58 sen during the first nine months of fiscal year ended Dec 30, 2007 (FY07). It is expected to release its fourth quarter results this month. 

KAF, in a report, noted that TSH was seeing growing earnings from upstream plantations due to its aggressive expansion of its landbank in the past two years, maiden contribution from its palm oil refinery operations under a joint venture with Wilmar International and sustained earnings from its biomass power plant. 

The group has a 50:50 joint venture with Wilmar for an annual 800,000 tonne palm oil refinery in Sabah. 

TSH remained “a relatively under-appreciated growth story” given its projected 32% compounded average growth rate between 2007 and 2009, KAF added. 

Furthermore, the group had good leverage to rising CPO prices as every RM100 a tonne increase would result in 5.7% improvement in earnings, the research house said. 

Despite the bright prospects, the stock has yet to fully recover from the recent market sell down. 

Based on Wednesday's closing price of RM3.26, the shares are trading at a price/earnings ratio of 9.2 times on KAF's estimated EPS of 30 sen for FY08. 

Like other plantation companies, TSH is likely to pay higher dividend due to a windfall from higher CPO prices.