Buying opportunity in TDM

PETALING JAYA: PublicInvest Research sees a strong performance ahead for TDM Bhd, which is expected to nearly double its earnings this year, banking on higher crude palm oil (CPO) prices and fresh fruit bunch (FFB) production growth of 3%-5%.
“We see opportunity in TDM at current levels as the share price is trading at undemanding valuations of only a 13 times PER (price-earnings ratio) despite the decent first quarter results announced recently. We maintain our outperform call with a higher target price of 85 sen after fine-tuning our numbers and rolling over our valuations to FY17,” it said in a report yesterday.
FFB production across the industry has been weakening but TDM’s has been growing as its plantation area is less affected by the extreme dry weather.
“Riding on FFB growth coupled with stronger CPO prices, we expect TDM to deliver a good performance this year,” PublicInvest Research said.
Excluding unrealised foreign exchange losses of RM16.8 million and other one-off losses, it said, TDM would have registered a core net profit of RM14.4 million, making up 20% of its full-year forecasts. Considering it is a seasonally low production period, PublicInvest deems the results in line with its full-year estimates.
The stronger revenue was led by better sales contribution from the plantation and the healthcare segments. The encouraging plantation contribution was attributed mainly to an increase in the CPO price to RM2,431 a tonne and CPO production. Meanwhile, the healthcare segment was bolstered by an increase in in-patient admissions and a higher number of in-patient days.
“Interestingly, the group has a total of RM326 million invested in fixed-income securities with an interest rate of 10.29% a year, contributing a fixed interest income of RM33 million, which makes up close to 50% of our full-year earnings forecasts,” PublicInvest said.
The group is set to complete the construction of its 60-tonne per hour mill in Kalimantan, Indonesia, by end-2016. Meanwhile, its 130-bed Kuala Terengganu Specialist Hospital is on track to open by October, raising its total hospital beds to 427 from 297 beds now.