TSH Resources

Osk Research had a research article on TSH Resources.

Now I am one who always like to refer back to what was written previously.

TSH reported 2005 Q2 earnings on 25th Aug 2005.

Quarterly rpt on consolidated results for the financial period ended 30/6/2005

On the next day, OSK had a research article on TSH.

TSH's annualised 1HFY05 revenue is within our expectation as all of its divisions recorded an improved sale figures. However, its net earning was 36.8% below market and our estimates. The disappointing earning was mainly due to its 65% owned Ekowood which recorded a thinner margin, as the increase in raw material costs and weakened EURO cannot be transferred to the customer immediately (90% of Ekowood's sale is exported and denominated in EURO). Besides, TSH's oil palm also posted a lower profit due to seasonal factor as FFBs production was generally lower during the 1H. This is further compounded with the lower CPO price and increase fertiliser costs.

Ahh... ze below estimate thingy yet again.

Osk notes that TSH performance was 36.8% below market and our estimates!

OSK was estimating a net profit of 61 million for TSH's fy 2005.

TSH only did 19.290 million for the first half of its fy 2005 and based on an annualised basis, TSH should be earning around 38 million or so for its fy 2005.

38 million is very far from the 61 million hor.

So what does OSK do?

We have decided to revise downward TSH's earning forecast by 8.7% and 6.8% for FY05 and FY06 respectively as we think Ekowood need time to gradually pass on the costs increase to customers. Weakened in CPO prices lately compounded with increase in fertiliser costs will also further impact TSH's bottom line. However, we like TSH for its promising Bio-Integration projects and maintain our Buy call with a 12-month target price of RM2.19 based on Sum of Parts method, implied a PER of 11.2x against FY06 FD EPS.

Hmmm.. they revised TSH's earnings from 61 million to 55.7 million... but... butt... buttt.... their fy 2006 earnings is estimated at 68.7 million.

So for a stock that failed to meet their estimations, OSK still managed to maintain a BUY call on it.

Price of TSH then was 1.74. OSK target price was 2.19.

TSH reported its next earnings on 25th Nov 2005.

Quarterly rpt on consolidated results for the financial period ended 30/9/2005

Net profit was 8.963 million.
Total ytd net profit fy 2005 was 28.253 million.

Hmmm... looks like it's way below OSK's estimates... and ... err... aiseh i cannot locate in OSK's website their comments on TSH earnings.... hmmmm..... mmm..... maybe me browser is koyak lah.. cannot pakai lor.

Anyhow in today's research notes... it was noted that TSH has a share sale agreement with Wilmar Edible Oils:

TSH Resources (TSH) has on 9 January 2006 entered into a Share Sale Agreement with Wilmar Edible Oils SB (Wilmar) to dispose 2.5m shares in TSH-Wilmar SB and 1 ordinary share in Bio Fuel Asia SB, representing 50% equity interest in each company. The move is to form a strategic alliance with Wilmar to undertake a palm oil refinery and kernel crushing together with an operation of cogeneration plant and electricity & steam for bio-fuel.

Now what is interesting to me is the following...

BUY. We reiterate our BUY recommendation with a 12-month target at RM1.78 based on sum of parts methodology. Coupled with a decent gross dividend yield of 3.6% for FY06, the stock may potentially deliver a 12-month total return of 25%.

Now... what is interesting is that in the earnings table, there is no longer an OSK estimates but instead it only states consensus estimates. (LOL!!!.. i wonder why! typo mistake? :P)

Anywayyyy.... ze consensus estimates:

fy 2005 earnings is at 45 million..
fy 2006 earnings is at 58.9 million.

Sooooo....... price of TSH is now at 1.47. And OSK is calling a buy based on sum-of-parts (meh leh ka?) on TSH with a target price of 1.78.

How?

I am sure if a OSK subscriber that follows the buy recommendation won't be too happy.

Just in Aug 2005, TSH was @ 1.74 with a buy and a target price of 2.19.

Now in Jan 2006, TSH is @ 1.47 with a buy and a target price of 1.78.

Die standing isn't it?



ps.

The dilution of TSH earnings caused by the conversion of warrants is a pretty interesting case study.