MARKET DEVELOPMENT
RHB Research upgrades TSH to Buy from Neutral
RHB Research upgrades TSH to Buy from Neutral
23/05/2014 (The Star) - RHB Research has upgraded TSH Resources to a Buy rating from Neutral with a raised fair value of RM3.91 from RM3.19.
In a note on Friday, the research house said TSH 1Q results were above its expectation, making up 24% of RHB’s pre-revision forecast.
“TSH has good age profile driving long-term double-digit production growth. The strong earnings delivery also means that balance sheet de-gearing will take place at a faster rate,” it said.
It noted that TSH’s 1QFY14 core earnings came in at RM35.5mil, making up 24% of our full-year forecast and 23% of consensus.
“Earnings growth was impressive at 72% on-year, driven by a 21% growth in production and an 18% rise in realised crude palm oil (CPO) price. Wood product segment maintained its breakeven position,” it said.
With the increase in production assumption, RHB FY14 earnings forecast for TSH is raised by 4% to RM153mil, while FY15 forecast is raised by 5%.
“We value the plantation business at an unchanged 16 times P/E. With a 14% upside, we upgrade TSH to a Buy,” it said.
RHB said TSH started planting the high-yielding Wakuba material in 2013 whereby 1,000 ha was planted.
These trees will hit maturity in 2H2016. The Wakuba material promises FFB yield of 35 tonnes/ha at its peak.
“We have not factored this into our forecast,” it said.
In a note on Friday, the research house said TSH 1Q results were above its expectation, making up 24% of RHB’s pre-revision forecast.
“TSH has good age profile driving long-term double-digit production growth. The strong earnings delivery also means that balance sheet de-gearing will take place at a faster rate,” it said.
It noted that TSH’s 1QFY14 core earnings came in at RM35.5mil, making up 24% of our full-year forecast and 23% of consensus.
“Earnings growth was impressive at 72% on-year, driven by a 21% growth in production and an 18% rise in realised crude palm oil (CPO) price. Wood product segment maintained its breakeven position,” it said.
With the increase in production assumption, RHB FY14 earnings forecast for TSH is raised by 4% to RM153mil, while FY15 forecast is raised by 5%.
“We value the plantation business at an unchanged 16 times P/E. With a 14% upside, we upgrade TSH to a Buy,” it said.
RHB said TSH started planting the high-yielding Wakuba material in 2013 whereby 1,000 ha was planted.
These trees will hit maturity in 2H2016. The Wakuba material promises FFB yield of 35 tonnes/ha at its peak.
“We have not factored this into our forecast,” it said.