Stripping out i) fair value gain on derivatives (RM1.7m), ii) net FX loss (RM24.5m), iii) loss on commodity futures contracts (RM9m), iv) gain on disposal of land in Indonesia and Sabah (RM385.6m), v) impairment of bearer plant and building (RM56.2m) and vi) loss from fair value adjustment of forest planting expenditure (RM37.2m), TSH recorded core net profit of RM209m, down 2.5% YoY. The results were in line with the street full-year expectation but below our expectation, making up 101% and 92%, respectively. The weaker-than-expected results were partly due to the loss of income following the sale of two estates and a mill last year. Despite the dismal results, we keep our FY23-25F earnings forecasts unchanged as we have already input a lower CPO price assumption of RM3,800/mt. Maintain Outperform with a lower TP of RM1.28 after lowering our valuations to 13x FY23 EPS. A first and final DPS of 2.5sen was proposed for the quarter (vs FY21: 3sen).
- 4QFY22 revenue (QoQ: +7.9%, YoY: -14%). During the quarter, the weaker sales of RM283m were mainly attributed to lower plantation revenue. Plantation revenue fell 13% YoY to RM259m, dragged by a decline in CPO prices despite higher production. 4QFY22 average CPO prices slipped from RM4,347/mt to RM3,540/mt (FY22: RM4,100/mt, YoY: +14.8%) while average PK prices tumbled from RM3,095/mt to RM1,805/mt (FY22: RM2,668/mt YoY: 12.9%). 4QFY22 FFB production rose 13.4% YoY to 22,807mt, mainly led by stronger production from Indonesia. For 2022, FFB production saw a marginal increase to 923,990mt.
- 4QFY22 core earnings tumbled to RM41m. The 4QFY22 earnings would have been better if not because of the hefty Indonesian export levy and duty on CPO amounting to RM8.9m. Stripping out the exceptional items, the Group’s core earnings tumbled 42% YoY to RM41m, dragged by weaker plantation earnings and higher production cost. On the other hand, other businesses would have been profitable after stripping out fair value loss on forest planting expenditure. Meanwhile, earnings contribution from its 21.9%-owned Innoprise Plantations dipped from RM7.3m to RM2.1m.
- Healthy gearing level. Following the disposal of two oil palm estates and one palm oil mill in Malaysia, the proceeds of RM248m have been mostly used for paring down the borrowings. The Group’s net gearing level has substantially reduced from 0.44x to 0.08x or net debt of RM177m. Consequently, the full-year borrowing cost has dropped by 21% to RM32m.
Source: PublicInvest Research - 24 Feb 2023
