Maybank Investment Bank Berhad
Date of Report: August 21, 2025

TSH Resources Delivers Robust 1H25 Results: Outlook, Risks, and Financial Insights for Investors

Overview: TSH Resources Outperforms Expectations in 1H25

TSH Resources, a leading Shariah-compliant plantation company listed in Malaysia, has reported first-half 2025 results that have exceeded market expectations. The outperformance was primarily driven by lower production costs and stronger Palm Kernel (PK) average selling prices (ASP). Despite the strong showing, Maybank maintains a HOLD rating on TSH due to limited upside, lack of competitive dividend yields, and regulatory risks stemming from its sizable exposure to Indonesia, where 91% of its estates are located.

Key Highlights and Investment Case

• 1H25 core profit after tax and minority interests (PATMI) surged 68% YoY, reaching MYR96 million, representing 71% of Maybank and 69% of consensus full-year estimates.
• 2Q25 core PATMI rose to MYR48 million, up 44% YoY and 3% QoQ.
• Operational efficiency gains and favorable PK ASPs were the main performance drivers.
• Despite outperforming, the company’s dividend yield remains behind peers, and regulatory uncertainty in Indonesia persists.
• Target price (TP) revised upward to MYR1.21 (from MYR1.17), on a lower 10x FY25 price-earnings ratio (PER), reflecting risk factors.

Financial Performance Snapshot: 2Q25 and 1H25 Results

Operational and Strategic Developments

• 1H25 Fresh Fruit Bunch (FFB) output was up a modest 0.4% YoY, trailing the projected 7% YoY growth for FY25. However, first-half production accounts for 47% of the full-year estimate, which aligns with historical seasonality, indicating room for a second-half pickup.
• Cost control was a key highlight, with all-in cost to customer declining 15% YoY to MYR2,141/tonne, aided by lower manuring expenses due to heavy rainfall in 1Q25.
• TSH has been aggressively buying back its own shares, acquiring approximately 70.46 million shares (5.1% of issued capital) in 2025, now holding 6.1% as treasury shares.
• Net cash position remains healthy at MYR61 million as of June 30, 2025, though the absence of dividend payments remains a sticking point.

Valuation and Price Target: HOLD Maintained Amid Limited Upside

Maybank has revised its earnings estimates upward for FY25E-27E by 22–24% on the back of lowered unit costs and stronger PK ASPs. Despite this, the stock remains a HOLD due to:

• Limited capital appreciation potential versus the new MYR1.21 target price (7% upside from MYR1.16 share price).
• Lack of competitive dividend yields compared to sector peers.
• High exposure to Indonesian regulatory and policy risks.

Share Price & Key Statistics

Segmental Breakdown: Palm and Bio-Integration the Growth Engine

• Palm and bio-integration revenue for 6M25: MYR517.6 million (+10.7% YoY)
• Other segment revenue for 6M25: MYR26.5 million (-2.5% YoY)
• Total EBIT for Palm and bio-integration in 6M25: MYR144.4 million (+59.2% YoY)
• Group EBIT margin improved significantly to 24.8% in 6M25 (from 12.8% in 6M24)

Key Financials and Forecasts: TSH Resources (MYR millions, unless stated)

Balance Sheet and Cash Flows: Strengthening Financial Position

• Cash & Short Term Investments projected to climb to MYR839 million by FY27E.
• Interest bearing debt continues to reduce, both short-term and long-term, resulting in a net cash position from FY24 onwards.
• Free cash flow yield set to rise from 10.6% in FY23A to a projected 17.6% in FY27E.
• Capex/revenue ratio drops to 2.7% by FY27E, reflecting disciplined capital expenditure.

Growth and Profitability Ratios: Margin Expansion and Improved Returns

• EBITDA margin rises from 25.9% in FY23A to 33.3% in FY27E.
• Pretax profit margin expands from 18.5% in FY23A to 26.6% in FY27E.
• ROAE improves from 4.8% in FY23A to 7.9% in FY27E.
• Dividend cover remains robust at above 3x throughout the forecast period.

Key Risks and Considerations for Investors

• Weather anomalies may impact output growth, affecting earnings and margins.
• Volatility in CPO prices and weaker prices for competing oils (soybean, rapeseed) may pressure profitability.
• Negative policies from importing or producing countries (Malaysia/Indonesia) could hinder upstream or downstream operations.
• Sharp declines in crude oil prices may erode palm biodiesel demand.

Conclusion: TSH Resources – Strong Operational Gains, Cautious Outlook

TSH Resources has demonstrated strong operational and financial performance in the first half of 2025, driven by cost improvements and favorable PK prices. While the company’s financial health is robust — with growing cash reserves and improving margins — investors should be mindful of the limited upside, sector-relative dividend yields, and regulatory uncertainties associated with its Indonesian exposure. For those seeking exposure to the plantation sector with a moderate risk profile and solid operational execution, TSH Resources remains a stock to watch, although compelling upside catalysts may be required for a more bullish stance.