By-election shores up TDM shares

By-election shores up TDM shares
Business & Markets 2013
Written by Afiq Isa of theedgemalaysia.com
Monday, 29 July 2013 10:00

KUALA LUMPUR: Shares in TDM BHD [] have registered significant gains over the past two weeks as investors picked up the stock leading up to the Kuala Besut by-election in Terengganu.

The run-up to voting day saw TDM shares gaining more than 25% during the period. The counter peaked at RM1 last Wednesday, the day of the by-election, from a low of 77 sen on July 17.

The rally retracted and the counter closed at 88.5 sen last Friday due to profit taking, with 17.47 million shares done.

According to a remisier from a bank-backed brokerage house, investors snapped up TDM shares in anticipation of the ruling coalition Barisan Nasional’s (BN) victory in Kuala Besut.

He said the preservation of the status quo allows the state government to proceed with existing investment initiatives.

“They (investors) learned of what happened on May 6, when shares went up following BN’s win in the 13th general election with a simple majority,” he said.

He added that a win for opposition coalition Pakatan Rakyat at the Kuala Besut by-election would have resulted in a hung state legislative assembly with both coalitions holding an equal number of seats.

“Maintaining the status quo means less uncertainty for jittery investors,” he pointed out.

In the by-election, BN candidate Tengku Zaihan Che Ku Abdul Rahman won the Kuala Besut state seat with 8,288 votes, beating PAS candidate Endot @ Azlan Yusof who garnered 5,696 votes.

TDM’s majority shareholder is Terengganu Inc Sdn Bhd, which is the state government’s investment arm. Terengganu Inc, whose chairman is Menteri Besar Datuk Seri Ahmad Said, holds a 47% stake in the PLANTATION [] and healthcare company.

It is worth noting that the shares in TDM, which have gone through a share split exercise, have been in the limelight over the past two months over abnormal trading activities.

On June 21 the counter lost RM1.24 in one day as it hit a limit-down price of RM2.90. It subsequently rebounded to hit limit-up the next trading day (June 24) to close at RM3.77.

Remisiers believe that the abnormal trading activity was due to anticipation of a share split exercise, which subdivided each TDM share into five ordinary shares alongside a reduction in par value to 20 sen from RM1 per share.

The split went into effect on June 28 and resulted in increased trading liquidity for TDM shares over the following three weeks.

According to a broker, investors viewed the share split as a positive move.

“TDM is known for giving generous dividends. With more liquidity in the market, the public is starting to take notice of the company and its growth potential,” he said.

TDM has a policy of declaring at least 30% of its earnings as dividends. Prior to the stock split, the company gave out a first and final dividend of 22 sen per share for 2012 financial year (FY12) ended Dec 31, representing 53% of total net profit.

The group’s interests lie in two core segments within and outside Terengganu — plantations and healthcare.

TDM, which derives 77% of its income from the plantations segment, owns two palm oil mills and manages 32,000ha of oil palm plantations in Terengganu.

The group has also made inroads into Indonesia with 8,000ha of planted oil palm land in Kalimantan. About half of its oil palm trees are at peak yield age of between nine and 18 years, with the rest being mainly immature trees.

In the healthcare segment, TDM is gaining a foothold as the leading private healthcare provider in the East Coast. It operates four specialist hospitals with another two under CONSTRUCTION [].

For FY12, TDM reported a profit-before-tax (PBT) of RM149 million, which was 32% lower than FY11’s PBT of RM220.6 million. The group had attributed the lower earnings to its plantations division’s underperformance due to the weakening of crude palm oil prices and unfavourable market conditions throughout last year.

The group remains positive about the long-term fundamentals of the plantations industry in spite of present challenges.



This article first appeared in The Edge Financial Daily, on July 29, 2013.