TSH Resources Berhad (TSH) has announced its results for the first half of the fiscal year 2024 (1HFY24), meeting expectations with a core profit after tax and minority interests (PATMI) of RM60.3 million, reflecting a 35.3% year-on-year increase. Despite a slight decline in revenue to RM494.9 million (-2.4% YoY), the company demonstrated resilience with an operating profit surge to RM90.7 million (+16.9% YoY), attributed to improved palm products' profitability and reduced corporate expenses.
Analysts at MIDF, Kenanga and Maybank have varied views on TSH's outlook. Kenanga Stock Broking House maintains an OUTPERFORM rating with a target price (TP) of RM1.30, citing firm earnings outlook and better realised prices for CPO and PK despite weaker output. The firm anticipates steady earnings for FY24-25 with expected average CPO prices around RM3,800 per metric tonne, and notes that TSH's net debt has significantly decreased, supporting further expansion.
In contrast, a revised NEUTRAL call has been issued by another analyst with a TP of RM1.19, highlighting that while TSH's performance was solid, its share price is expected to remain stable unless significant changes in CPO prices occur. The earnings forecast remains stable, and the potential downside risk in the second half of FY24 is linked to CPO price volatility amid high crop cycle seasonality.
The plantation segment showed robust performance, with profit growing to RM53.2 million (+15.3% YoY) despite a drop in crude palm oil (CPO) sales volume. This was driven by higher average selling prices for CPO, which increased to RM3,704 per metric tonne (+6.0% YoY), and palm kernel (PK) prices at RM2,250 per metric tonne (+26.1% YoY). However, challenges such as the Indonesia Export Levy and Duty on CPO, amounting to RM21.2 million (-37% YoY), and slower production volumes due to environmental factors in Indonesia, impacted overall profitability. The plantation segment maintained a healthy margin of 25.1% (+3.8 percentage points).
The 'Others' segment, primarily encompassing wood division sales, registered a narrower loss of RM1.7 million. This reduction in losses reflects improved sales performance.
TSH is also focusing on expanding its planted oil palm area from 40,000 to 47,000-50,000 hectares over the next 2-3 years, as it seeks to capitalise on the improved financial position following asset divestments.