KUALA LUMPUR (May 20): TSH Resources Bhd (KL:TSH) fell on Wednesday while analysts downgraded the stock after the palm oil producer underperformed in the recently-ended quarter.
TA Securities and RHB Research lowered their recommendations while others cut their target prices for the stock, splitting the consensus. MBSB Research flagged limited upside ahead for the stock even as prices of the crude palm oil stay elevated.
“While elevated prices could continue to provide some earnings support, weaker output visibility is likely to cap upside,” the research house said and kept its ‘neutral’ call.
Shares of TSH Resources fell 4.1% or five sen to RM1.18 at Wednesday's closing, their lowest since March 10. At its last price, the group has a market value of RM1.5 billion. The stock has erased nearly all of the gains racked up in April on the back of the war-driven rally and is now nearly flat year to date.
Prices of the edible oil used in everything from lipstick to diesel are off high but remained some 13% higher than before the outbreak of geopolitical conflict in the Middle East, supported by biofuel mandates. The benchmark palm oil futures last traded at RM4,582 on Bursa Malaysia Derivatives.
Post-results, there are four ‘buy’, five ‘hold’, and no ‘sell’ calls among the research houses tracked by Bloomberg. The average 12-month target price is now RM1.42.
For Maybank Investment Bank, output at TSH Resources could pick up in the coming quarters on seasonal recovery from biological stress in the first quarter following a high crop cycle in 2024 and 2025.
“We expect earnings to play catch up in the coming quarters” on higher average selling prices and seasonal output recovery, the house said. However, the stock remains a ‘hold’ on valuations concerns with the stock now trading near its six-year average forward earnings multiple.