Published: Tuesday September 18, 2012 MYT 8:55:00 AM
Kenanga Research raises TSH Resources TP to RM2.95
KUALA LUMPUR: Kenanga Investment Research has raised its Target Price for TSH Resources to RM2.95 from RM2.85 based on an unchanged forward price-to-earnings ratio (PER) of 15.8 times on its higher FY13E EPS of 18.7 sen.
“Our 15.8 times forward PER is based on +1 standard deviation (SD) above the five-year mean of forward PER band, implying a premium to its peers which only command a +0.5SD,” it said on Tuesday.
Kenanga Research continues to like TSH for its young age profile of around 6.2 years old, which is the youngest for planters under our coverage.
Last Friday, TSH announced that it had secured a total of 20.21% stake in its proposed acquisition of Pontian United Plantation (PUPB), making the latter an associate company of TSH.
Effectively, TSH has emerged as Pontian's largest shareholder after raising its stake in Pontian by 12.25% (from 7.96% before the takeover offer).
On June 26, TSH had announced its plan to take over PUPB at an offer price of RM90 per share to be satisfied by RM45.06 in cash and RM44.94 in TSH shares at RM2.14 per share. This represented 10.9x PER over PUPB's FY11 earnings. PUPB website stated that it owns 40,000 acre (about 16,000 ha) of palm oil plantations with most of it in Sabah (Kinabatangan and Lahad Datu).
Kenanga Research said it was positive on the deal as it deemed it as EPS accretive. FY13E EPS should improve 3% as the net income increase of 5% to RM158mil would surpass the share base dilution of 3% to 845.4 million shares.
“Further benefit can be realised via TSH-Pontian synergy as Pontian's plantation landbank is located very near to TSH's landbank in Lahad Datu, Sabah,” it said.