FW: AmBank Research - TH Plantations : De-gearing initiatives to continue Hold, 17 Oct 2017

 

 

STOCK FOCUS OF THE DAY

TH Plantations : De-gearing initiatives to continue          Hold

 

Maintain HOLD on TH Plantations (THP) with an unchanged fair value of RM1.20/share, which is based on a FY18F PE of 20x. THP is currently trading at FY18F PE of 18.4x and FY19F PE of 18.1x. We forecast THP's dividend yield at 2.3% in FY18F based on a share price of RM1.10. We have assumed an FFB production growth of 15% for THP in FY17F. The group recorded a 16% YoY increase in FFB output in 8MFY17. Looking ahead to FY18F, we forecast that THP's FFB production would improve by a slower 10%.

 

We understand that THP's FFB production reached its peak in August 2017. The group's FFB output is expected to be relatively flattish in 2HFY17. THP's FFB production is anticipated to be driven by Sarawak. About 50% of THP's FFB production comes from Sarawak. We believe that THP's operating profit margin would improve in 2HFY17 as the group had already applied most of its fertiliser in 9MFY17.

 

We expect the pace of new plantings of oil palm in Indonesia to decline in FY18F. As THP's landbank in Indonesia is on peat soil, the group is unlikely to carry out any new planting in FY18F. Peat soil plantings are viewed unfavourably by THP's clients such as Wilmar International. We believe that THP would continue to sell assets to reduce its net gearing. A non-core asset is the rubber plantations in Sabah, which has a net book value of RM230mil. Without accounting for any asset disposal, we estimate THP's net gearing to be 67.1% as at end-FY18F vs. 73.4% as at end-FY17F.

 

Others :

Axiata Group : Mild potential 2300MHz impact to XL Axiata           Buy

WCT Holdings : A second placement of new shares within a year               Hold

                               

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DISCLAIMER:

The information and opinions in this report were prepared by AmInvestment Bank Bhd. The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of AmInvestment Bank Bhd. Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmBank Group Bhd and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgment as of this date and are subject to change without notice.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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