PETALING JAYA: TSH Resources Bhd is expected to deliver a 91% year-on-year (y-o-y) core earnings per share growth for financial year 2021 as the planter continues to ride on the crude palm oil (CPO) price upswing.

       This conclusion is derived from Maybank Investment Bank (Maybank IB) Research’s meeting with TSH Group recently.

       “TSH is positive on the CPO price outlook in 2022 due to under-investment by the industry in recent years and under-fertilisation by smallholders due to low CPO prices drom 2018 to 2019,” said the research house in its latest report after.

       TSH is on track to hit 7% to 11% y-o-y fresh fruit bunch (FFB) growth for 2021 as its nine months FY21 output grew 11% y-o-y driven by stronger output from Indonesia.

       In addition, its preliminary FFB growth guidance for 2022 is similar at 7% to 11% y-o-y, driven by young trees in Indonesia, good rainfall in the past two years,and a disciplined fertilising regime.

       Maybank IB Research noted that the plantation group’s forward sales had been consistent with past practices, which is merely one to two months ahead.

       TSH is poised to benefit from the present high CPO spot prices.

       Indonesia has lowered its export taxes from July 2021 that allows growers there to receive higher CPO average selling price (ASP) net proceeds in the third quarter of 2021 compared with the first-half of 2021, according to the research house.

       TSH group has several plantations and mills across Sabah as well as in Sumatra and Kalimantan, Indonesia.

       While cost for 2021 is likely to be flat y-o-y, it will likely be impacted by higher prices of fertilisers in 2022, according to Maybank IB Research.

       TSH is looking to lock in its fertiliser requirements for 2022 in November and December, the research house said, adding that “hopefully, the rising cost pressures will be more than offset by the high CPO ASP in 2022.”

       On the environmental, social and governance (ESG) initiatives, TSH has a sustainable palm oil policy that is broadly similar to the industry leaders with no deforestation, peat and exploitation policy at its core.

       Furthermore, the TSH board has pledged to develop a more robust ESG agenda going forward.

       Maybank IB Research has assessed TSH’s overall ESG risk to be medium given the inherent business risks from operating over a wide geographical area across Malaysia and Indonesia.The research house is maintaining a “buy” call on TSH with an unchanged target price of RM1.46.