TSH to see core earnings growth in FY21, says Maybank IB

KUALA LUMPUR: Maybank Investment Bank Research maintained its "buy" recommendation on TSH Resources Bhd on expectations of core earnings growth in FY21 due to higher crude palm oil (CPO) average selling price and despite Indonesia's new CPO export tax structure.

The research house said the group reiterated its expectation of strong output growth in FY21 after two years of tepid growth.

TSH is hopeful of double-digit growth in FY21 due to younger trees in Indonesia, where the group's age profile is about 11 years.

Maybank IB maintained its FY21-23 earnings forecasts and target price of RM1.30 based on 21.5x FY21 price-earnings ratio, which is minus-one standard deviation to its five-year mean.

Meanwhile, TSH is focused on paring its debt in FY21 with a long-term target of bringing down its near gearing to 0.4x.

TSH will be a step closer to that target if its planned disposal of about 10,816ha of oil palm area in Indonesia to KL Kepong for US$110m (announced in Aug 2020) materialises, said Maybank IB.

"Originally targeted for completion in 1Q21, it seems the deal is likely deferred due to extension of time required to fulfil the outstanding condition precedents which are delayed due to the challenges of remote working and other limitations as a result of the COVID-19 pandemic.

"In the meantime, the present high CPO prices are helping to boost its bottom line and lower gearing," it added.
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