ดว
AmInvestment Bank
TSH RESOURCES
(TSH MK EQUITY, TSHR.KL)
Supported by a lower effective tax rate
Company Report
PLANTATION
21 Aug 2025
HOLD
(Downgraded)
Rationale for report: Company Results
TSH RESOURCES Company Results: Supported by a Lower Effective Tax Rate
Gan Huey Ling, CFA
gan-huey-ling@ambankgroup.com
03-2036 2305
Price and Key Data
Investment Highlights
- In spite of weaker CPO prices, TSH’s core net profit inched up by 3.2% QoQ to RM48.5mil in 2QFY25 supported by a lower effective tax rate. Effective tax rate fell to 21.1% in 2QFY25 from 26.5% in 1QFY25 due to higher deferred tax assets and absence of a withholding tax. Going forward, we expect net earnings to soften as the group increases its fertiliser application in 3QFY25. Also, according to Bloomberg, prices of potash and urea have risen by 13% and 30% respectively since the start of the year. We downgrade TSH to HOLD from BUY as we think that the group would be affected by higher fertiliser costs in FY26F.
- HOLD with a lower TP of RM1.29/share vs. RM1.38/share previously. We derived TSH’s TP by applying a FY26F PE of 12x, which is one SD below the five-year average of 15x. We have reduced TSH’s FY26F net profit by 6.5% to account for higher fertiliser costs. According to Bloomberg, prices of potash and urea have gone up by 13% and 30% respectively since the beginning of this year.
- TSH’s 1HFY25 core net profit of RM95.5mil (ex-unrealised forex gains of RM1.9mil) was within our forecast but exceeded consensus by 7%. Although CPO prices have rebounded and FFB production is expected to improve in 3QFY25, we believe that the group’s net earnings would not be as strong as 1HFY25 as fertiliser application is envisaged to pick up. Plantation companies usually apply the bulk of their fertiliser in the first nine months of the year as the weather is usually wet in the last quarter.
- Net profit surged by more than two-fold YoY to RM95.5mil in 1HFY25. This was driven by an increase in palm product prices. Average CPO price rose by 7.9% to RM3,932/tonne in 1HFY25 from RM3,645/tonne in 1HFY24. Comparing 2QFY25 against 1QFY25 however, average CPO price retreated by 11.9% to RM3,695/tonne from RM4,193/tonne. FFB production edged up by 0.4% YoY in 1HFY25.
- Performance of the TSH/Wilmar refinery improved in 1HFY25. TSH registered a larger share of net profit in the TSH/Wilmar refinery of RM1.9mil in 1HFY25 vs. RM0.6mil in 1HFY24. We attribute this to timely purchases of feedstock.
YE to Dec Financials
| YE to Dec | FY24 | FY25F | FY26F | FY27F |
|---|---|---|---|---|
| Revenue (RMmil) | 1019.8 | 1143.2 | 1202.0 | 1225.0 |
| Net profit (RMmil) | 135.7 | 148.4 | 148.4 | 153.0 |
| EPS (sen) | 9.8 | 10.8 | 10.8 | 11.1 |
| EPS growth (%) | 42.6 | 9.4 | 0.0 | 3.1 |
| Consensus net (RMmil) | 139.7 | 135.0 | 139.0 | |
| DPS (sen) | 2.5 | 2.0 | 2.5 | 3.0 |
| PE (x) | 11.8 | 10.8 | 10.8 | 10.5 |
| EV/EBITDA (x) | 5.0 | 5.1 | 4.9 | 4.8 |
| Div yield (%) | 2.2 | 1.7 | 2.2 | 2.6 |
| ROE (%) | 6.8 | 7.0 | 6.6 | 6.5 |
| Net gearing (%) | na | 6.8 | 7.1 | 7.8 |
Stock and Financial Data
| Shares Outstanding (million) | 1,380.2 |
| Market Cap (RMmil) | 1,601.0 |
| Book Value (RM/Share) | 1.45 |
| P/BV (X) | 0.8 |
| ROE (%) | 6.8 |
| Net Gearing (%) | na |
| Major Shareholders | Tan Family (46.3%) |
| EPF (3.6%) | |
| Free Float | 53.7 |
| Avg Daily Value (RMmil) | 0.9 |
Price performance
| 3mth | 6mth | 12mth | |
|---|---|---|---|
| Absolute (%) | +0.1 | -6.6 | +3.6 |
| Relative (%) | +4.3 | -3.9 | +5.9 |
Company profile
TSH produces and sells CPO, mainly in Indonesia. The group also exports refined palm products via the jointly owned TSH/Wilmar refinery in Kunak, Sabah.
TSH’s earnings are mainly from the production and sale of CPO and PK products. About 6% of the group’s FY23 pre-tax profit came from the TSH/Wilmar palm refinery.
TSH’s main customers are refineries such as Wilmar International and Musim Mas.
TSH has oil palm estates in Indonesia and Malaysia. More than 90% of FFB production come from Indonesia while the balance 10% are from Malaysia.
TSH’s competitive advantage lies in its large plantable reserves. Hence, the group does not need to acquire more landbank to sustain earnings. We estimate that TSH has more than 30,000ha of plantable land in Indonesia.
Investment thesis and catalysts
We have a BUY on TSH as being a pure planter, the group will benefit from a rise in CPO price.
Share price catalysts are a rise in CPO price and stronger-than-expected earnings.
Valuation methodology
We applied a FY26F PE of 12x to arrive at TSH’s target price of RM1.29/share. The PE of 12x is one SD below the average of 15x in the past five years. TSH’s PE ranged from a low of 7x to a high of 30x in the past five years. We applied a discount due to TSH’s growing proportion of ageing oil palm trees.
Risk factors
Key risks are a fall in CPO prices and losses in the TSH/Wilmar palm refinery. Earnings risk may also arise from a weaker-than-expected recovery in FFB yields.
A RM100/tonne decline in CPO price would affect TSH’s net profit by 5% to 10% assuming everything else remains the same.
EXHIBIT 1: EARNINGS SUMMARY
| YE 31 Dec (RMmil) | 1HFY24 | 1HFY25 | % | 1QFY25 | 2QFY25 | % QoQ |
|---|---|---|---|---|---|---|
| Revenue | 494.9 | 544.1 | 9.9 | 275.3 | 268.8 | -2.4 |
| Cost of sales | (330.4) | (300.4) | -9.1 | (150.2) | (150.2) | 0.0 |
| Gross profit | 164.5 | 243.7 | 48.2 | 125.2 | 118.6 | -5.3 |
| Other op income | 9.9 | 14.8 | 49.9 | 7.5 | 7.8 | 4.7 |
| Other op expenses | (105.6) | (113.8) | 7.7 | (56.2) | (58.1) | 3.4 |
| Op profit | 68.7 | 144.7 | >100 | 76.4 | 68.3 | -10.7 |
| Interest expense | (6.8) | (5.4) | (2.7) | (2.7) | ||
| Forex | 2.2 | 1.9 | 1.2 | 0.7 | ||
| Gain on disposal of investment | 0.0 | 0.0 | 0.0 | 0.0 | ||
| FV chg on biological assets | 0.0 | 0.0 | 0.0 | 0.0 | ||
| Loss on discont operations | 0.0 | 0.0 | 0.0 | 0.0 | ||
| Share of profits in associates | 6.2 | 6.9 | 11.5 | 3.7 | 3.2 | -13.8 |
| Share of profits in JV | 0.6 | 1.9 | >100 | (0.0) | 1.9 | >100 |
| Pre-tax profit | 71.0 | 150.0 | >100 | 78.6 | 71.4 | -9.3 |
| Tax | (20.5) | (35.9) | 75.2 | (20.9) | (15.0) | -27.9 |
| Minority interest | (9.8) | (16.7) | 70.6 | (9.6) | (7.1) | -26.1 |
| Net profit | 40.7 | 97.4 | >100 | 48.2 | 49.2 | 2.2 |
| Core net profit | 38.5 | 95.5 | >100 | 47.0 | 48.5 | 3.2 |
| EPS | 3.0 | 7.3 | >100 | 3.6 | 3.7 | 4.5 |
| Gross DPS | 0.0 | 0.0 | 0.0 | 0.0 | ||
| Average CPO price | 3,645 | 3,932 | 7.9 | 4,193 | 3,695 | -11.9 |
| FFB production (tonnes) | 401,663 | 403,161 | 0.4 | 198,112 | 205,049 | 3.5 |
Source: Bursa Announcement
EXHIBIT 2: VALUATIONS
| Target PE (x) | 12 |
| CY26F EPS | 10.8 |
| ESG premium | – |
| 12-month target price | 1.29 |
EXHIBIT 3: CHANGE IN EARNINGS
| RMmil | FY25F | FY26F | FY27F | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Old | New | % | Old | New | % | Old | New | % | |
| Revenue | 1,162.2 | 1,143.2 | (1.6) | 1,221.9 | 1,202.0 | (1.6) | 1,244.9 | 1,255.0 | 0.8 |
| Net earnings | 148.2 | 148.4 | 0.1 | 158.8 | 148.4 | (6.5) | 163.6 | 153.0 | (6.5) |
EXHIBIT 4: ESG MATRIX
| Assessment | Parameters | Weightage | Rating | Rationale | ||
|---|---|---|---|---|---|---|
| RSPO certification | 100% certification | 33% | * | * | * | No disclosure for RSPO in FY24 |
| Supply chain auditing | 100% traceable | 33% | * | * | * | 98% traceable to plantation in FY24 |
| GHG emissions | Net zero by 2050F | 33% | * | * | * | 242,949 tCO2eq of emiissions in FY24 |
| Weighted score for environmental assessment | 100% | * | * | * | ||
| Migrant workers welfare | Number of workers grievances | 40% | * | * | * | Zero in FY24 |
| Fatalities | Zero fatalities | 30% | * | * | * | Zero in FY24 |
| Lost Time Injury Frequency rate | Below 1 | 30% | * | * | * | LTIFR declined from 14.5 in FY23 to 8.6 in FY24 |
| Weighted score for social assessment | 100% | * | * | * | ||
| Related party transactions | Value of RPTs | 40% | * | * | * | RM285.5mil in FY24 – mainly with TSH/Wilmar palm refinery |
| Women in workforce | % in workforce | 30% | * | * | * | 25% of workforce were women in FY24 |
| Remuneration to directors | Total value of remuneration or % of salary costs | 30% | * | * | * | RM10.1mil in FY24 |
| Weighted score for governance assessment | 100% | * | * | * | ||
| Environmental score | 50% | * | * | * | ||
| Social score | 30% | * | * | * | ||
| Governance score | 20% | * | * | * | ||
| Overall ESG Score | 100% | * | * | * | ||
Source: AmInvestment Bank
EXHIBIT 5: FINANCIAL DATA
| Income Statement (RMmil, YE 31 Dec) | FY23 | FY24 | FY25F | FY26F | FY27F |
|---|---|---|---|---|---|
| Revenue | 1,066.5 | 1,019.8 | 1,143.2 | 1,202.0 | 1,225.0 |
| EBITDA | 273.9 | 315.0 | 342.5 | 359.1 | 373.2 |
| Depreciation/Amortisation | (100.0) | (127.0) | (134.4) | (150.6) | (166.8) |
| Operating income (EBIT) | 173.9 | 187.9 | 208.1 | 208.5 | 206.4 |
| Other income & associates | 8.2 | 27.2 | 29.9 | 32.5 | 35.7 |
| Net interest | (6.7) | 0.2 | 5.2 | 2.3 | 8.7 |
| Exceptional items | 22.5 | 4.5 | 0.0 | 0.0 | 0.0 |
| Pretax profit | 197.8 | 219.9 | 243.3 | 243.3 | 250.9 |
| Taxation | (72.0) | (61.6) | (58.4) | (58.4) | (60.2) |
| Minorities/pref dividends | (30.7) | (22.6) | (36.5) | (36.5) | (37.6) |
| Net profit | 95.2 | 135.7 | 148.4 | 148.4 | 153.0 |
| Core net profit | 72.7 | 131.1 | 148.4 | 148.4 | 153.0 |
| Balance Sheet (RMmil, YE 31 Dec) | FY23 | FY24 | FY25F | FY26F | FY27F |
| Fixed assets | 1277.8 | 1338.0 | 1492.0 | 1618.9 | 1754.4 |
| Intangible assets | 44.3 | 42.1 | 42.1 | 42.1 | 42.1 |
| Other long-term assets | 878.4 | 910.0 | 939.9 | 972.4 | 1008.1 |
| Total non-current assets | 2,200.5 | 2,290.1 | 2,474.0 | 2,633.4 | 2,804.6 |
| Cash & equivalent | 255.5 | 266.3 | 176.8 | 242.4 | 320.2 |
| Stock | 108.4 | 102.7 | 140.9 | 148.2 | 151.0 |
| Trade debtors | 36.2 | 44.1 | 219.2 | 230.5 | 234.9 |
| Other current assets | 244.5 | 44.5 | 44.5 | 44.5 | 44.5 |
| Total current assets | 644.6 | 457.6 | 581.5 | 665.6 | 750.7 |
| Trade creditors | 123.9 | 108.4 | 197.6 | 210.9 | 215.7 |
| Short-term borrowings | 191.2 | 201.1 | 241.3 | 289.6 | 347.5 |
| Other current liabilities | 2.8 | 7.4 | 7.4 | 7.4 | 7.4 |
| Total current liabilities | 317.9 | 316.9 | 446.4 | 507.9 | 570.6 |
| Long-term borrowings | 111.0 | 58.6 | 79.1 | 110.7 | 155.0 |
| Other long-term liabilities | 110.9 | 111.3 | 111.8 | 111.8 | 111.8 |
| Total long-term liabilities | 221.9 | 169.9 | 190.8 | 222.5 | 266.8 |
| Shareholders’ funds | 2047.0 | 2003.7 | 2124.4 | 2238.4 | 2350.0 |
| Minority interests | 258.3 | 257.4 | 293.9 | 330.4 | 368.0 |
| BV/share (RM) | 1.48 | 1.45 | 1.54 | 1.62 | 1.70 |
| Cash Flow (RMmil, YE 31 Dec) | FY23 | FY24 | FY25F | FY26F | FY27F |
| Pretax profit | 197.8 | 219.9 | 243.3 | 243.3 | 250.9 |
| Depreciation/Amortisation | 100.0 | 127.0 | 134.4 | 150.6 | 166.8 |
| Net change in working capital | (57.2) | (66.0) | (197.3) | 64.1 | 72.9 |
| Others | (14.0) | (40.3) | (189.7) | (339.7) | (375.5) |
| Cash flow from operations | 226.6 | 240.6 | (9.4) | 118.3 | 115.1 |
| Capital expenditure | (59.4) | (53.9) | (105.0) | (105.0) | (105.0) |
| Net investments & sale of fixed assets | 33.0 | 2.8 | 0.0 | 0.0 | 0.0 |
| Others | (9.5) | (15.6) | 0.0 | 0.0 | 0.0 |
| Cash flow from investing | (35.9) | (66.7) | (105.0) | (105.0) | (105.0) |
| Debt raised/(repaid) | (284.0) | (40.4) | 60.7 | 79.9 | 102.2 |
| Equity raised/(repaid) | 0.0 | (16.3) | 0.0 | 0.0 | 0.0 |
| Dividends paid | (51.1) | (77.0) | (34.5) | (27.6) | (34.5) |
| Others | 6.8 | (15.0) | 0.0 | 0.0 | 0.0 |
| Cash flow from financing | (328.4) | (148.7) | 26.2 | 52.3 | 67.7 |
| Net cash flow | (137.6) | 25.1 | (88.2) | 65.6 | 77.8 |
| Net cash/(debt) b/f | 376.3 | 251.1 | 262.0 | 173.9 | 239.5 |
| Net cash/(debt) c/f | 238.7 | 276.3 | 173.9 | 239.5 | 317.3 |
| Key Ratios (YE 31 Dec) | FY23 | FY24 | FY25F | FY26F | FY27F |
| Revenue growth (%) | -18.3 | -4.4 | 12.1 | 5.1 | 1.9 |
| EBITDA growth (%) | -25.4 | 15.0 | 8.8 | 4.9 | 3.9 |
| Pretax margin (%) | 18.5 | 21.6 | 21.3 | 20.2 | 20.5 |
| Net profit margin (%) | 8.9 | 13.3 | 13.0 | 12.3 | 12.5 |
| Interest cover (x) | 40.6 | na | na | na | na |
| Effective tax rate (%) | 36.4 | 28.0 | 24.0 | 24.0 | 24.0 |
| Dividend payout (%) | 36.3 | 25.4 | 18.6 | 23.2 | 27.1 |
| Debtors turnover (days) | 12 | 16 | 70 | 70 | 70 |
| Stock turnover (days) | 37 | 37 | 45 | 45 | 45 |
| Creditors turnover (days) | 68 | 62 | 100 | 100 | 100 |
Source: Company, AmInvestment Bank
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