KUALA LUMPUR: TSH Resources Bhd's core net profit is expected to erode further in 2022-2024, on the back of lower fresh fruit bunch (FFB) output and production cost assumptions, Hong Leong Investment Bank Bhd (HLIB) said.
Post-virtual meeting with TSH recently, HLIB said the plantation group had clocked in FFB output of 857,700 tonnes in the 11 month (11M) of 2022 (-0.8 per cent), and management expects total output of 920,000 tonnes in FY22.
This matched TSH's FY21's FFB output of 919,000 tonnes.
"Moving into FY23, management expects FFB output to fall by 9.0-10 per cent (to 830,000-840,000 tonnes), as additional area reaching maturity bracket (300-400 hectares) will be more than offset by a decline in planted landbank," it said in a note today.
Hence, HLIB tweaked TSH FY22-FY24 core net profit forecasts by 0.8 per cent, -5.2 per cent and 4.8 per cent, to reflect a marginal adjustment to its FFB output and production cost assumptions, in line with management's guidance.
Based on HLIB's assumptions, every RM100 per tonne change in crude palm oil (CPO) price assumption will result in TSH's FY23-FY24 core net profit changing by seven to eight per cent.
HLIB maintained its "Hold" call on TSH, with a higher target price of RM1.12 from RM1.07 previously.
"While we like TSH for its favourable age profile and improving balance sheet, further upside is capped by the absence of earnings growth catalyst," it said.