Hong Leong IB Research upgrades TSH to Buy, projects FFB output to grow

by **Cals** Wed 29 Jan 2014, 10:03

Business & Markets 2014

Written by theedgemalaysia.com

Wednesday, 29 January 2014 09:59

KUALA LUMPUR (Jan 29): Hong Leong IB Research (HLIB) has upgraded TSH Resources Bhd to a Buy (from Hold previously) and said it was projecting TSH’s FFB output to grow further by 8.6-16% p.a. in 2014 and 2015 respectively, mainly on the back of additional land bank coming into mature stage.

In a note Wednesday, the research house said TSH’s production cost in 2013 will come in lower than previous year, mainly on lower fertilizer cost and higher output, which altogether more than offset higher labour cost (from minimum wage).

Beyond 2013, overall production cost will remain on the downtrend, on increasing landbank reaching maturity stage, it said.

HLIB said the recent acquisition of 26,794 ha of plantation land in Sabah will boost TSH’s total planted landbank by 26% to 130k ha and net gearing from 0.55x to 0.71x.

The research house said despite the high net gearing ratio post landbank acquisition, management remains relatively comfortable with its balance sheet standing and will continue to look out for more plantation landbank and maintain its planting plan.

“The financial performance of Ekowood will continue to improve and return to the black this year, thanks to gradual economic recovery in both Europe and rationalizing operating costs.

“SOP-derived target price lowered by 4.9% to RM3.12, after taking into account the enlarged share base. Upgrade from Hold to Buy,” it said.