Thursday, August 23, 2012

TSH- bottom-line keeps sliding

Results Update

For QE30/6/2012, TSH's net profit dropped by 3% q-o-q or 59% y-o-y to RM14.6 million while revenue was mixed- rose 23% q-o-q but declined 15% y-o-y to RM279 million.


Table 1: TSH's last 8 quarterly results


Chart 1: TSH's last 17 quarterly results

A look at Chart 1 above shows that the company has been experiencing declining bottom-line for the past 4 quarters. If you compared the segmental results for 1H2012 & 1H2011 (see Table 2 below), you would notice that all segments (especially the Palm & Bio-integration segment) have experienced decline in top-line & bottom-line. I post on this stock in 2006 and did not look at it for quite a while. All this time, I was having a generally positive impression of this stock from newspaper reports and the share price movement. The sliding financial performance made me change my mind about the stock.


Table 2: TSH's segmental results for 1H2012 & 1H2011

Valuation

TSH (closed at RM2.59 yesterday) is now trading at a PE of 23 times (based on last 4 quarters' EPS of 11.04 sen). At this multiple, TSH is overvalued.

Technical Outlook

The stock is still in an uptrend.


Chart 2: TSH's monthly chart as at Aug 22, 2012 (Source: Tradesignum)

Conclusion

Based on declining financial performance & expensive valuation, I feel that TSH should be rated REDUCE.

7 comments:

Kong Hui CHONG said...

I concur.

ericng7424 said...

Hi Alex,

I was looking at another plantation stock, RSAWIT, its EPS has been very dissappointing after the recent rights issue but the share price still can maintain above RM1. Is this stock worth to invest and hold given it has large landbank?


Thanks,

Eric

konchy said...

Hi Alex,

Would like to ask a bit about technical analysis regarding highest resistance.

Let's take Pavreit for example.

If the price was adjusted for dividend, the highest resistance would be RM 1.395.

If the price was not adjusted for dividend, the highest resistance would be RM 1.43.

I assume the right answer would be whichever method the majority is using.

So my question is: Which method is the majority using?

Kok-Siang said...

what is the green color in the table mean for?
Are the results adjusted to the bonus 1 for 1?

Alex Lu said...

Hi Kok Siang,

I have a note to explain the better performance for the green area:

The Group’s revenue of RM329.9 million for the quarter under review was 30.6% higher than the immediate preceding quarter of RM252.6 million. The Group posted a profit before taxation of RM51.6 million as compared to RM33.6 million in the immediate preceding quarter.

The performance for the Palm and Bio-integration segment for the quarter has improved significantly as FFB cropping recovered strongly from the trough trend of previous quarters and as Indonesia estates yield continues its upward momentum in line with their age profile. However, Cocoa Manufacturing segment registered a lower profit on the back of lower production and lower cocoa butter prices affected by continuing decline in cocoa butter ratio. The Wood Products segment remains lethargic and continues to record losses attributable to the lower sale volume.

I did not include that in the post.

Alex Lu said...

Hi ericng7424

My last call on RSAWIT did not pan out as I expected. Given the weakness in the plantation sector, I expect this stock to slide back to RM1.00 & even the strong horizontal support at RM0.95-0.96. That would be a good level to buy some. For now, we should just wait & see.

Alex Lu said...

Hi konchy

I am not sure which is the preferred price data for charting. If a stock had a RM1 dividend, we will remember it. We would 'adjust' the price mentally. If it is just a 10-sen dividend payout, we won't remember it. As such, adjustment to price data is about what's significant.

In the case of REITs, it is not likely that you would get big dividend. Those who invest in REITs are very yield-sensitive. They may adjust for even a 5-sen dividend.

If that's correct, then you should use a dividend-adjusted price chart for REITs.