Sabah-based TSH Resources’ FY24 earnings exceed expectations
KUCHING (March 5): Sabah-based TSH Resources Bhd’s (TSH) financial year 2024 (FY24) core net profit (CNP) has surged by 87.6 per cent to RM136 million, exceeding market full-year expectations by 26 per cent.
According to analysts from AmInvestment Bank Bhd (AmInvestment Bank), the robust results and positive variation was largely due to higher palm product prices, an earnings turnaround for the group’s TSH-Wilmar refining joint venture (JV) and an absence of expenses in respect of the secondary listing on the Singapore Exchange Board (SGX) which it was first listed on back in September 2023.
The analyst guided that crude palm oil (CPO) prices had surged by 13.9 per cent during the group’s fourth quarter (4Q) of FY24.
Alongside a 12.7 per cent expansion in fresh fruit bunch (FFB) expansion and a decline in manuring expenses, this caused the group’s 4QFY24 core net profit to soar from RM67.5 million from RM24.4 million in the previous quarter (3QFY24).
Overall, this caused the group’s average realised crude palm oil (CPO) price rose by 10.4 per cent to RM3,793 per tonne from RM3,437 per tonne in FY23.
However, its FY24 FFB production still slid by 12.2 per cent due to tree stress and the lagged impact of the 3QFY23 El Nino phenomenon in Indonesia which caused a significant reduction as more than 80 per cent of TSH’s FFB production originates from Indonesia.
Nevertheless, AmInvestment Bank opines that TSH’s output will recover by 9 per cent in FY25.
Meanwhile, the group’s JV with Wilmar International Ltd (Wilmar) has finally swung back into the black in FY24 after it registered a net loss of RM3 million for its share back in FY23 which primarily due to a significant decline in CPO prices.
In FY24, the TSH-Wilmar JV return back to profitability with TSH’s share of net profit in the refinery coming in at RM8.5 million.
“We attribute the earnings turnaround to timely purchases of feedstock,” the analyst opined.
Looking ahead in 2025, analysts from the research house of TA Securities Holdings Bhd (TA Securities) reports that TSH’s management is anticipating that CPO prices will stay high in 1QFY25 due to restocking activities ahead of Ramadan and supply constraints due to slower and reduced closing stocks.
But beyond that, TA Securities is expecting CPO prices to face downward pressure from bumper soybean harvests in the US and South America.
“Additionally, the significant premium of palm oil price over other edible oils could erode its market competitiveness, dampening demand and limiting further price upside,” they said.
Taking a different stance, AmInvestment Bank was more optimistic on the trajectory of CPO prices moving forward and to account for the higher prices and subsequent higher plantation margins, they have opted to raise their FY25 and FY26 estimate earnings for TSH by 28.6 per cent and 28.7 per cent to RM148.2 million and RM158.6 million, respectively.
-Agency
