TSH land sales to lead to solid growth

PETALING JAYA: TSH Resources Bhd will embark on new expansion after a selective divestment of land that brought about minimal net gearing for the plantation group, says Kenanga Research.

“The group has started work to expand its oil palm area by another 20%-25% within the next two to three years. It is also studying carbon market opportunities following its secondary listing on the Singapore Exchange (SGX) Mainboard,” said the brokerage firm in a report yesterday.

Kenanga Research describes TSH’s recent land sale in north-east Kalimantan as a significant pivot.

Saddled with RM637mil in net debt in April 2022, TSH agreed to sell 13,898ha of mostly unplanted agricultural land for RM731mil cash. About 7,817 ha of the land was sold in August 2022 followed by another 575 ha in January 2023.

“All in all, TSH has received RM457mil in cash. Coupled with operating cash flows, net debt has been pared to just RM88mil as of September 2023. Disposal of the remaining 5,506 ha for RM274mil should conclude by mid-2024,” the research house noted.

Altogether, the divestment has already enabled TSH to substantially de-gear and the group can now consider expansion once again.

According to Kenanga Research, TSH should still have 60,000 ha of land left with only 40,000 ha planted with oil palm.

More importantly, the divestiture has allowed TSH to re-capitalise and it is now planning to develop new oil palm area.

In addition, a new nursery and planting team are now in place and the group is aiming to plant 8,000 ha-10,000 ha of new area over the next two to three years.

The research house said, “An estimated capital expenditure of RM200mil-RM300mil will be funded by a mix of the sales proceeds, operating cash flows as well as borrowings.”

Meanwhile, in September 2023, TSH shares were listed on the SGX Mainboard.

“While TSH’s primary listing remains on Bursa Malaysia, the group sees wider opportunities with a SGX presence,” Kenanga Research said.

“Firstly, the bulk of TSH’s earnings are already from Indonesia, hence, an SGX listing could provide greater flexibility in terms of funding, and regional growth. For example many Indonesian corporations are comfortable with Singaporean listings and wider carbon-related opportunities in terms of market or trading including renewable energy and sustainable forestry, where TSH manages over 100,000 ha in Sabah,” added the brokerage firm.

On the price of crude palm oil (CPO), Kenanga Research expects CPO to trade between RM3,500 and RM4,000 per tonne this year.

“This (the price) will be lower for TSH at RM3,000-RM3,500 per tonne as most of its CPO is sold at Indonesian prices.

Kenanga Research has maintained an “outperform” call on the stock with a target price of RM1.30.

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