TSH Sukuk Ijarah

MARC has affirmed its rating of AA-IS on TSH Sukuk Ijarah’s RM300m Sukuk Ijarah Medium-Term Notes programme. The outlook is stable. TSH Ijarah is one of three special purpose funding vehicles set up by its parent, TSH Resources to fund TSH’s crude palm oil operations. The rating action is premised on TSH’s healthy cash flow generating ability on account of its long track record in palm oil cultivation, its relatively low production costs and its healthy tree maturity profile. The rating is moderated by TSH’s leverage position and the susceptibility of its operating and financial performance to CPO price volatility and foreign exchange risks.

TSH is predominantly an upstream CPO producer, with palm products contributing 85 per cent of consolidated revenue of RM414.7m in 1H2016 (unaudited) while its two other segments, wood products/reforestation and cocoa manufacturing/bio-integration, contributed 6.9 per cent and 8.1 per cent respectively.

In 1H2016, TSH issued RM150m IMTNs through a funding vehicle, Sukuk Murabahah, increasing its borrowings to RM1,544.7m. The proceeds of the issuance are largely expected to repay short-term debt. TSH’s pro-forma DE would be 0.92 times, unchanged from end-2015. Of the total borrowings, about 37.1 per cent is in the form of revolving credits and trade facilities which are regularly rolled over and self-liquidated with trade receivables and inventories.

Another 19.0 per cent (or about RM292.9m consists of current maturities and includes RM165m IMTN under the rated TSH Ijarah which are likely to be reissued upon maturity. With the paring down of short-term debt and terming out of current maturities, TSH’s debt maturity profile will be better aligned with its cash flow generation.

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Palm oil plantation

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