Sabah-based TSH now the lowest cost CPO producer
Published on: Sunday, November 23, 2014
KUALA LUMPUR: Sabah-based TSH Resources Bhd is now the country's most efficient oil palm planter, and possibly, among the best in the region.Its estates in Sabah currently hold a track record of average fresh fruit bunches (FFB) yield at 30 tonnes per hectare from 2011 to 2013, much higher than the industry's FFB average of 19 tonnes per ha, which has remained stagnant for over a decade. The 17-year old plantation company started from cocoa, to be the lowest cost producer of Crude Palm Oil in the country.Given its three-year CPO average costs of production at RM830 per tonne, TSH Resources has easily overtaken other well experienced plantation big boys such as Kuala Lumpur Kepong Bhd, IOI Corp Bhd and United Plantations Bhd, according to plantation analysts.
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On average, the cost of production among oil palm planters in Peninsula Malaysia is about RM1,200 to RM1,300 per tonne while in Sabah and Sarawak, it varies between RM1,200 and RM1,500 per tonne.According to TSH Resources Chairman Datuk Kelvin Tan Aik Pen, there is no magic formula to TSH Resources' success in attaining a high FFB yield in a cost-efficient environment, the two key benchmarks closely monitored by plantation players."What we have is just sheer hard work and the ongoing desire to continuously push down our production costs. "Moving forward, TSH Resources wants to step up on its current FFB yield and manage cost control efficiently."He says that TSH Resources is also thankful for having the foresight to invest in the superior planting material – Wakuba – some 11 years ago.
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"Our Wakuba high-yielding ramets will help to spur further growth in our yield per ha to a significantly higher level than the industry's average in the coming years."Hence, Tan expects TSH Resources' potential FFB yield can be increased to about 35 tonnes per ha within the next five to seven years as 82pc of our plantations comprising immature and young immature trees are progressing well into higher yield age particularly in our estate in Kalimantan."
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The higher FFB yield going forward will also help to bring down the company's production costs, says Tan adding that its FFB production grew 26pc to 164,000 tonnes in the third quarter of 2014 from 129,778 tonnes in the same quarter last year.He also envisages that TSH Resources' CPO production costs (ex-estate, excluding kernel) can come down further to about RM700 per tonne of CPO within the next five years.TSH Resources currently has landbank consisting 65,000ha of unplanted areas as well as 50,000ha of planted areas.According to Tan, TSH Resources is fully committed to undertake new planting activities between 4,000ha and 5,000ha annually. In 2013, the group planted 4,200ha inclusive of those under the Plasma Development Programme in Kalimantan."We will also be on the look out for greenfield land either in Sabah and Kalimantan and acquire them if the opportunity arises," he adds.Within the next five years, he also hopes the company's promising growth will significantly enhance the market capitalisation from the current RM3bil."We will be very comfortable once we have grown into a sizeable plantation outfit but still focus on being a highyield and low cost producer of CPO," Tan said.The group posted at 16.2pc jump in core operating profit from RM40.1mil for the third quarter from RM34.5mil a year earlier. Revenue rose to 12pc to RM246.9mil from RM220.5mil bringing the current year to date revenue to RM835.9mil.HLIB Research in its latest report has a "hold" recommendation of the stock, saying that it continues to like TSH Resources for its young tree profile which indicates strong FFB output growth going forward.However, the research unit sees limited upside potential to its share price given the weak CPO price sentiment as TSH Resources' earnings have relatively high sensitivity to CPO price changes.Stay up-to-date by following Daily Express’s Telegram channel.
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