ROOM FOR GROWTH: TSH’s planted area of only 27,957 hectares (33 per cent) of its total land area of 85,730 hectares will
allow the company to continue its planted area expansion for the next 10 to 15 years.

16/01/2012 (Borneo Post) - TSH Resources Bhd (TSH) is poised to see steady growth in financial year 2012 to 2013, on the back of its young tree profile and long term growth prospects.

“TSH’s fresh fruit bunch (FFB) production is currently in the exponential growth stage due to its low average tree profile of just 7.5 years,” Kenanga Investment Bank Bhd (Kenanga Research) stated in its research report.

Thus, TSH was set to deliver remarkable FFB growths of 32 per cent to 20 per cent in financial year 2012 to financial year 2013. Kenanga Research noted that TSH would enjoy explosive growth phase for the next three to five years as oil palm trees’ FFB production usually peaks at the age of 10 to 12 years.

With up to 54 per cent of the company’s planted estates still immature, below three years, TSH’s long term growth prospect remained intact.

Also, its planted area of only 27,957 hectares (33 per cent) of its total land area of 85,730 hectares would allow the company to continue its planted area expansion for the next 10 to 15 years, assuming disciplined planting of 4,000 to 5,000 hectares per year.

“The strong FFB growth will keep TSH’s earnings momentum steady at eight to 10 per cent in financial year 2012 to 2013 despite the expected lower average crude palm oil (CPO) prices of RM3,000,” the report noted.

Kenanga Research maintained that TSH’s strong earnings growth provided a cushion against the possible lower CPO prices. It believed that the company’s financial year 2011 earnings could very well be maintained in the next two years as long as the average CPO price stayed above RM2,850 per million tonnes.

The research house went on to peg a fair value of RM2.03 per share for TSH, believing that an earnings surge of 10 per cent year-on-year would in financial year 2013 forecast to RM159 million would make the valuation more attractive at RM2.23 per share.

It also expected TSH’s financial year 2012-2013 earnings to reach RM145 million to RM159 million.

“The earnings increase will mainly originate from its plantation division as CPO and palm kernel volumes should surge in line with the growth in FFB production,” it added.

Kenanga Research also observed that TSH’s cocoa and wood division should register weak and insignificant earnings, contributing less than five per cent of net income to the group.