HDBSVR: TSH Resources, Maintain Buy

TSH Resources: Lower CPO price assumptions

-Story: We cut our 2009 and 2010 CPO price forecasts to RM2,610/MT and RM2,525/MT from RM2,800/MT and RM2,650/MT, respectively, after factoring in an anticipated increase in soybean planting intentions this year as highlighted in the US Department of Agriculture (USDA) survey. We are maintaining our 2008 CPO price forecast at RM3,100/MT, as we expect tight soybean supplies to continue this year, while supply from this year's US soybean planting will only be felt in early 2009. We also fine tuned our forecasts to reflect TSH's FY07 results, mainly higher plantation operating costs due to escalating fertilizer prices, although these were more than offset by a cut in SG&A expenses based on last year's performance.

-Point: The above revisions led to 3% cut in our FY08F net profit to RM119.1m (+29% y-o-y) and 8% cut in FY09F to RM124.1m (+4% y-o-y). We expect TSH's FY10 earnings to grow by 3% y-o-y to RM127.3m, on the back of expected higher FFB production.

-Relevance: We are maintaining our BUY call for TSH, with a revised price target of RM4.30 based on 30% discount to its DCF valuation. Our valuation implies 14.3x CY09 EPS. Catalysts for the stock include additional production from recent acquisitions and aggressive planting in Indonesia, contribution from its Sabah refinery, bioenergy power plants, and palm pulp and paper plant.