TSH affected by estate issues in Sabah, Kalimantan

KUCHING (Nov 22): TSH Resources Bhd’s (TSH) performance has been affected by issues at its both its estates in Sabah and Kalimantan, Indonesia, and its prospects are expected to be remain affected by these issues despite the current favourable crude palm oil (CPO) price movement.

MIDF Amanah Investment Bank Bhd’s research team (MIDF Research) in a report, pointed out that during the third quarter of 2024 (3Q24), TSH’s profitability of the plantation subsegment decreased by -22.0 per cent y-o-y to RM55.8 million, despite higher CPO average selling price realised circa RM3,683 per metric tonne (+9.3 per cent y-o-y) and PK of RM2,485 per metric tonne (+49.3 per cent y-o-y).

“The decline was mainly driven by reduced FFB production due to natural biological yield cycles after consecutive high-yield years in FY22 to FY23, operational disruptions caused by a social dispute related to the Community Plantation Development Scheme (Plasma), and the impact of the Indonesia Export Levy and Duty on CPO, which amounted to RM17.5 million (-34.9 per cent y-o-y).

“Consequently, FFB production, CPO, and PK sales volumes fell by -28.1 per cent y-o-y, -32.3 per cent y-o-y, and -32.5 per cent y-o-y, respectively.

“Nonetheless, the segment’s margin remained solid at 25.5%, a slight dip of 0.1 pts, reflecting stable production costs,” it said.

A lower operating loss was also seen in the other segment at -RM1.8 million mainly due to higher timber sales and the cessation of cocoa division in 4QFY23.

“While TSH is primarily a pure upstream player with a decent correlation to CPO price movements, the company’s estates on both sides have not been in an ideal condition to fully capitalise on the elevated CPO movement,” MIDF Research said.

As such, it maintained its ‘neutral’ call on the stock.

-Agency

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