TSH to meet expectations, targets higher FFB output

PETALING JAYA: Plantation company TSH Resources Bhd is confident of delivering the strong earnings growth analysts expect, riding on an anticipated one-third jump in fresh fruit bunch (FFB) production by 2013.

“We are confident, we can achieve [FFB] growth of 30% to 35% this year,” group managing director Datuk Tan Aik Sim told reporters yesterday, pointing out that its FFB production growth had averaged 30% in recent years, jumping as much as 51% year-on-year in FY10 as more
Indonesian estates mature.

It expects FFB production to reach 600,000 tonnes by 2013, double the 279,000 tonnes produced in FY10 and about 300,000 tonnes the first nine months of FY11, Tan said.

That would help TSH’s FY11 net profit meet street expectations, Tan said. TSH’s FY11 earnings are expected to come in between RM110 million and RM126 million, and between RM97.3 million and RM146 million, according to Bloomberg data at the time of writing.

Thanks to higher crop production and the rise in mature acreage from Indonesia, TSH’s 9MFY11 net profit more than double to RM94.3 million from RM40.8 million the year before, on the back of 30% revenue growth to RM855.6 million from RM662.2 million.

Some 73% of TSH’s planted oil palm estates comprise immature and young mature trees which will produce more fruit upon reaching their prime production years (year seven to 15) over the next three to five years, Tan said after the company EGM, where shareholders approved a one-for-one bonus issue. “That translates into better results for the years to come, as we sustain a high growth rate going forward,” he added.
Tan says TSH's large landbank augurs well for its aspirations to be a regional plantation player.

At present, about 54% or 25,850ha of its oil palm estates are immature or below four years old, while 19% or 5,263ha have attained maturity (four to six years) but had yet to enter into prime production phase. Only 27% of its trees are over seven years old. Of its immature crop, 58% is situated in Indonesia and the remainder held under an associate company in Sabah.

Additionally, about 60,212ha or 60% of the company’s 98,996ha landbank was still unplanted as at end-2010. “We still have a large landbank for our future expansion, this augurs well for the company’s aspirations to be a regional plantation player,” he said.

In seeking out new landbank, TSH plans to retain its focus in Indonesia, where land and labour are easier to obtain relative to Malaysia.

Contributions from its plantation segment are expected to increase to 98% this year from 95% in FY10, he said.

Tan is less exuberant on TSH’s cocoa manufacturing segment, which saw a lower profit of RM2.3 million. Similarly, its wood products segment, under Ekowood International Bhd, registered a loss of RM1.6 million for 3Q.

“These [two segments] will most likely remain insignificant as we focus on being a regional plantation player,” Tan said, when asked if these businesses would eventually be hived off.

TSH added eight sen or 2.23% to close at RM3.67 yesterday.