Tuesday, December 14, 2010

TH Plantations up on Outperform call by RHB Research, CPO surge

KUALA LUMPUR: Shares of TH PLANTATION []s Bhd rose in early trade on Tuesday, Dec 14, in line with some plantation stocks after the surge in crude palm oil (CPO) prices and a recent upgrade in the stock by RHB Research Institute.

At 9.46am, it was up nine sen to RM1.70 with 1.95 million shares done.

The FBM KLCI slipped into the red, down 0.77 point to 1,509.02. Turnover was 228.95 million shares done. Turnover was 228.95 million shares valued at RM191.5 million. Advancers beat decliners 214 to 156 while 218 stocks were unchanged.

RHB Research Institute had on Friday initiated an Outperform call on TH Plantations and assigned it a PE of 11 times FY11 and fair value of RM2.30.

The research house said TH Plantations is the plantation arm of Lembaga Tabung Haji and it has plantation land bank of about 39,159 hectares and five palm oil mills with a total milling capacity of 702,000 tonnes per annum.

'We project TH Plantations THP to record a three-year earnings CAGR of 25% to FY12, on the back of a three-year revenue CAGR of 14%.

'The reason for the stronger profit growth is the higher CPO prices as well as an expectation of improved FFB yields, which translate to better margins. We project net dividend payouts at a consistent 55-60% p.a., which translate to attractive net yields of 5.6% for FY10, rising to 7-8% for FY11-12,' it said.

RHB Research said TH Plantations' earnings are very sensitive to CPO price movements and every RM100/tonne change in CPO price would impact earnings by 10%-12% per annum.

'Assigning it a PE of 11 times FY11, which is the mid-point of its historical average, we arrive at a fair value of RM2.30. Initiate with Outperform,' it said.

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