TSH's FY23 hit by higher expenses and tax, earnings should improve in FY24
TSH Resources Bhd's (TSH) financial year 2023 (FY23) performance was dragged by higher expenses from its listing on the SGX but analysts are optimistic that the group might record better earnings in FY24 to FY25.
In a report, the research team at AmInvestment Bank Bhd (AmInvestment) noted that TSH's core net profit fell by 62.6 per cent to RM72.5 million in FY23, dragged by expenses in respect of its listing on the SGX, a higher effective tax rate, weaker palm product prices and increased costs of production.
It also pointed out that TSH incurred expenses of RM6.2 million for its secondary listing in Singapore.
Furthermore, the group's effective tax rate rose to 36.4 per cent in FY23 from 5.5 per cent in FY22 due to higher non-tax deductible expenses.
Indonesia's CPO export tax and levy also affected TSH's revenue by a smaller RM107.8 million in FY23 compared with RM225.2 million in FY22 as the government reduced tax and levy rates last year.
Nevertheless, the research team at Kenanga Investment Bank Bhd (Kenanga Research) opined: “Earnings should improve over FY24-25F on relatively steady CPO prices amidst easier production costs.
“CPO prices are expected to stay rangebound, between RM3,500 to RM4,000 per MT over 2024 to 2025F as global edible oil demand is likely to continue growing three to four per cent yo-y while a tight supply outlook is expected for 2024 and begin 2025 with below average inventory despite a muted El Nino.
“Average CPO prices of RM3,800 per MT is expected for the sector but TSH should average closer to RM3,400 due to Indonesian levies and duties where most of its estates are located.
“Input costs such as fertiliser and fuel have started easing since 2H FY23 and should continue in FY24F while FY25F should enjoy firmer palm kernel prices after sliding over FY22 to FY23.”
Proceeds from the staggered disposal of North East Kalimantan land (RM457 million so far), Sabah estates (RM258 million) and operating cashflow also helped pared net debt from RM816 million at the start of FY22 to RM48 million (two per cent net gearing) as of December 31, 2023, it added.
Financially, Kenanga Research said TSH has prepared the nursery and team to plant another 8,000 to 10,000ha of oil palm or an expansion of 20 to 25 per cent over the next two to three years.