KUALA LUMPUR: Kenanga Research is positive over TSH Resources Bhd 's proposed disposal of two Sabah estates as it deems the proposed price to be fair and relieves the group from major replanting activities.

       Recently, TSH announced it entered into a conditional share sale and purchase agreement with Sharikat Keratong Sdn Bhd for the disposal of Ladang Gomantong and Ladang Ong Yah Ho, together with a 40 metric tonne per hour palm oil mill in Kinabatangan, Sabah for RM248mil.

       It said in a filing with Bursa Malaysia that the planted area for the two estates are 974 ha and 1,959 ha,

       respectively for a total of 2,933 ha.

       The proceeds will be used to pare down the group’s borrowings and the transaction is expected to be completed by 1QCY22.

       "EV/planted Ha for the TSH-SKSB deal is at c.RM84.6k, which is fair when compared against Sabah’s typical transaction value of c.RM80k.

       "It is also at a 39% premium to IOI’s offer (EV/planted Ha of RM60.8k) for estates in Labuk & Sugut, Kinabatangan and Beluran.

       "This deal is a more favorable arrangement compared to the terminated TSH-KLK deal, which required TSH to sell its prime Indonesian estates (9,734 Ha) for c.RM460m (EV/planted Ha of RM47.1k)," said Kenanga.

       The research house added th the deal also relieves RSH from major replanting activities given the estates' average tree age profile of 18.3 years.

       Kenanga maintained "market perform" with an unchanged target price of RM1.05 based on FY22 price-earnings ratio of 17x in line with peers' 16-18x, which reflects minus-0.75 standard deviation from the mean.