25/10/2011 (Borneo Post) - TH Plantations Bhd (TH Plantations) recorded higher net profits for the ninth month of the financial year 2011, owing to higher prices for crude palm oil (CPO) and palm kernel (PK) in addition to its higher fresh fruit bunch (FFB) production.

INCREASING PROFITS: Photo shows a factory working line up tanks of CPO. TH Plantations
records higher net profits for the ninth month of the financial year 2011, owing to higher prices
for CPO and PK in addition to its higher FFB production.

RHB Research Institute Sdn Bhd (RHB Research) stated in the research report that TH Plantation’s net profit for the period was 86 per cent year-on-year, in line with consensus expectations as it came in at 73 to 77 per cent of the financial year 2011 forecasts.

“The high net profits was a result of the improved margins brought about by the higher CPO prices which recorded a 31 per cent increase to RM3,203 per tonne, higher PK prices which increased by 57 per cent year-on-year to RM2,411 per tonne. The company’s stronger FFB production also contributed as it grew by 7.6 per cent year-on-year,” the report added.

Going forward, the research house remained cautious on TH Plantation, “Although the CPO price achieved so far is higher than our projected RM3,100 per tonne for this financial year, we believe THP may not be able to achieve such high prices in the fourth quarter.”

RHB Research was more positive about its FFB production, given the still strong growth seen in the third quarter. It believed that TH Plantation stood a strong chance to surpass its FFB growth projection of 5.4 per cent for financial year 2011.

It however addressed the potential delayed effects of the wet weather experienced earlier this year.

For the coming years, the research house retained its FFB growth estimates for TH Plantation at 7.1 per cent for financial year 2012 and 17.9 per cent for financial year 2013.

It pegged an unchanged fair value of RM2.20 per share for TH Plantations and upheld its view that the company was an undervalued stock which would appeal to both growth and defensive investors.

However, the positive stance would not go unchallenged as the industry faced risks such as a possible reversal in CPO price trends and a possible change in the emphasis on implementing global biofuel mandates and trans-fat policies.