PETALING JAYA: TSH Resources Bhd
’s earnings outlook has been upgraded, as its second quarter results have exceeded expectations due to higher than estimated margins, analysts say.
For the quarter ended June 30, the palm oil planter posted higher revenue of RM268.7mil and net profit of RM49.2mil.
In a report, TA Research said for the first half of this year (1H25), TSH’s core net profit climbed to RM106.2mil, accounting for 77% of both its and consensus full-year estimates.
“Despite flat fresh fruit bunch (FFB) production growth, 1H25 operating profit rose 53.5% year-on-year (y-o-y) to RM161.8mil, driven by stronger palm oil prices.
The average crude palm oil (CPO) price increased 7.9% y-o-y to RM3,932 per tonne, while the palm kernel price surged 56.2% y-o-y to RM3,261 per tonne,” the research house said.
TA Research anticipates CPO prices may face downward pressure if a US-China soybean sales agreement is not concluded before late September, which could trigger weaker export demand.
“In our view, a prolonged and substantial decline in soybean prices would inevitably weigh on CPO, as a narrower soybean oil premium would erode palm oil’s relative cost advantage and competitiveness in key markets,” the research house noted.
TA Research upgraded its recommendation from “hold” to “buy” with a higher target price of RM1.30 a share.
Kenanga Research maintained its “outperform” call with a higher target price of RM1.35 from RM1.30.
It noted that having sold less strategic assets to de-gear, TSH is in a net cash position with good operating cash flows expected over FY25 to FY26.
“Eventually, we expect TSH’s upstream area to grow from 39,000ha currently to between 47,000ha and 48,000ha by FY26 then between 54,000ha and 55,000ha by FY28 and FY29,” the research house said.
Kenanga Research also said it will upgrade its FY25 to FY26 core earnings per share estimates for TSH by 16% to 12.5 sen and 13% to 12.5 sen, respectively, on a combination of lower taxes, better CPO prices (in FY25 only) as well as palm kernel prices over both years.
Meanwhile, Hong Leong Investment Bank Bhd Research (HLIB Research) maintained its “hold” call on the palm oil processor with a higher target price of RM1.25 a share.
It also raised its FY25 to FY27 core net profit forecasts for TSH by 28.%, 10.7% and 10.7%, respectively, mainly to account for lower CPO production costs and finance cost assumptions.
“Management expects palm product prices to stay relatively stable in 2H25, underpinned by stronger export demand, stabilised inventories, and improved price competitiveness against soybean oil,” HLIB Research said.
In addition, the US government’s proposed expansion of biofuel mandates could lift soybean oil prices, indirectly supporting palm oil prices.
“These positive drivers may be partly offset by ongoing US tariff actions on key trading partners, which could trigger market volatility and disrupt global trade flows,” the research house said.
