PETALING JAYA: MIDF Research is maintaining a “buy” call on TSH Resources Bhd
due to its positive earnings outlook, supported by the elevated crude palm oil (CPO) price of RM4,000 per tonne.
The research house expects potential growth momentum in TSH’s fresh fruit bunches (FFB) production, especially from the younger trees, which might provide visible revenue and earnings growth.
“We are maintaining our “buy” call with a target price (TP) of RM1.90.”
TA Research is also maintaining a “buy” call on TSH with an unchanged TP of RM1.67, based on a price-to-earnings ratio of 20-times in the calendar year 2023 (CY23).
“The key risks are a down cycle in the CPO price, an escalation in production costs, a global economic slowdown, lower-than-expected FFB production and an increasing supply of soybean oil in the market.
“The management expects the CPO price to hover at current levels, supported by supply concerns arising from the Russia-Ukraine conflict and unfavourable weather conditions in South America, which will put upward pressure on the soybean oil price.
“The production cost is expected to increase in the financial year 2022 (FY22) due to the spike in fertiliser costs and a higher minimum wage,” said TA Research.
Meanwhile, JF Apex Securities Bhd attributed higher CPO and palm kernel (PK) selling prices to the rise 44.37% in TSH’s net profit for the second quarter ended June 30, 2022 to RM57.34mil, from RM39.72mil in the same period last year.
Kenanga Research, meanwhile, is maintaining an “outperform” call on TSH due to attractive long-term and visible growth prospects, coupled with a strengthening balance sheet.
“Essentially, TSH is now ready to expand its upstream oil palm planting from nearly 40,000 hectares (ha) currently to around 60,000 to 65,000 ha over the next six to eight years.
“Having toned down nearer term FY22 and FY23 cash EPS, our TP is also trimmed from RM1.90 to RM1.80.
“The target P/E ratio of 11 times takes into consideration flattish-to-slower earnings after FY22, smaller capitalisation compared to integrated peers that trade at 15 times P/E ratio and three-star or marginally above average environmental and social governance scores,” said the research house.
Hong Leong Investment Bank Research is maintaining a “hold” on TSH, with an unchanged TP of RM1.07.
