MARC Ratings has assigned a rating of AA-IS to TDM Berhad’s Islamic Medium-Term Notes (Sukuk Wakalah) Programme of RM1.5 billion in nominal value based on the Shariah principle of Wakalah Bi Al-Istithmar, with a stable outlook. The assigned rating incorporates a one-notch rating uplift based on MARC Ratings’ assessment of implicit support from the Terengganu state government through its 59.67% stake in TDM held via Terengganu Incorporated Sdn Bhd (“Terengganu Inc”). The programme was previously unrated, and RM260 million is currently outstanding under the programme.
The standalone rating of TDM incorporates an assessment of its two key business segments, namely plantation and healthcare, that provide a degree of earnings diversification. The business prospects of the group’s plantation operations are supported by management’s continued efforts to improve plantation and milling quality through technology-driven replanting and investments in new machineries. However, the group remains exposed to crude palm oil (CPO) price volatility and adverse weather conditions, which may affect plantation output and earnings. While these risks are currently largely abated, the reliance of field and harvesting operations on foreign labour exposes the group to changes in foreign worker policies in the country. Meanwhile, its healthcare division’s strong presence in the east coast of Peninsular Malaysia is expected to continue providing strong and stable earnings contribution. Challenges to attract and retain qualified medical practitioners within the healthcare industry, however, could result in cost pressures and potentially affect operational efficiency and service quality.
TDM recorded revenue of RM379.9 million in 1H2026 (1H2025: RM304.2 million). The increase in revenue, together with profit before tax (PBT) of RM6.4 million compared with a loss of RM23.4 million in 1H2025, was primarily driven by higher sales volumes of CPO and palm kernel (PK), as well as an improvement in average revenue per patient. In 2025, the group recorded revenue of RM768.1 million (2024: RM645.6 million; 2023: RM594.4 million), with roughly equal contributions from the plantation and healthcare segments. Profitability remained moderate, with pre-tax profit of RM42.4 million at an operating profit margin of 9.37% in 2025. The profit margin reflects ongoing cost pressures from labour expenses and the prevailing age profile of the group’s plantations, as well as medical supplies and other input costs at its hospitals.
The plantation division, operating under wholly-owned subsidiary TDM Plantation Sdn Bhd (TDMP), had 28,332 planted hectares as at end-1H2026, of which 23,672 hectares, or approximately 84%, were classified as mature. In 1H2026, fresh fruit bunches (FFB) production stood at 141,882 metric tonnes (MT), while CPO and PK production amounted to 36,011 MT and 8,641 MT, respectively. Milling efficiency remained stable, with an oil extraction rate of 19.45% and kernel extraction rate of 4.70%. Average selling prices also remained supportive at RM4,380/MT for CPO and RM3,658/MT for PK. The plantation segment generated revenue of RM189.3 million in 1H2026. In 2025, FFB production improved to 305,809 MT (2024: 283,727 MT), translating into an FFB yield of 13.09 MT/ha. While the yield remained relatively modest, CPO production increased to 78,268 MT in 2025 (2024: 61,410 MT), supported by higher crop production. In 2025, the plantation segment recorded revenue of RM399.5 million (2024: RM291.2 million), on account of higher production and favourable palm oil prices. Nevertheless, the segment remains exposed to palm oil price volatility, weather conditions and labour constraints, all of which could affect production and earnings stability.
The plantation maturity profile remains mixed. As at end-1H2026, young and prime-young palms accounted for 12,165 hectares, providing a sizeable base of palms entering or within their productive age bands. However, the area planted with palms aged above 25 years increased to 7,318 hectares from 6,581 hectares in 2025, underscoring the need for continued replanting. TDMP has outlined a replanting programme of 1,040 to 1,303 hectares annually from 2026 to 2028, which should progressively rejuvenate the plantation age profile, although production could be moderated in the interim as replanted areas take time to reach maturity. Total plantation capex over the period is projected at RM211.1 million. The group’s plantation operations are fully certified under the Roundtable on Sustainable Palm Oil (RSPO) and Malaysian Sustainable Palm Oil (MSPO) standards, enhancing the marketability of its products.
The healthcare division provides a steady source of earnings for the group, underpinned by sustained demand for medical services amid an ageing population and growing health awareness. The segment operates five hospitals with a total of 364 licensed beds. Revenue increased to RM368.5 million in 2025 (2024: RM354.4 million), in line with an increase in total patient volume to 215,935 in 2025 (2024: 201,239). In 1H2026, bed utilisation varied across the group’s hospitals, with stronger performance at its Kuantan (66%) and Terengganu (60%) hospitals, compared with underutilisation at its Kelana Jaya (13%) and Taman Desa (40%) hospitals. The healthcare segment continued to provide stable earnings in 1H2026, recording revenue of RM190.6 million and PBT of RM16.0 million, supported by sustained demand for healthcare services, although utilisation continued to vary across the group’s hospitals. Expansion plans remain a key growth driver, with total healthcare capex projected at RM187.1 million between 2026 and 2028. Planned developments include new hospitals in Bertam, Penang, and Chukai, Terengganu, each expected to have 100 operational beds by 2028. The group is also expanding its existing facilities through increased bed capacity and additional specialist clinics at its Kuala Terengganu hospital, expanded oncology services at its Kuantan hospital, and increased bed capacity at its Tawau hospital. While these initiatives are expected to strengthen the group’s long-term prospects, they will also increase capital commitments and execution risks.
Total borrowings stood at RM477.3 million as at end-1H2026, translating into a moderate debt-to-equity (DE) ratio of 0.70x. The group expects borrowings to increase to about RM648.2 million through 2027, including planned issuances under the Sukuk Wakalah Programme, to fund the planned capex. The DE ratio is estimated to increase to about 0.9x. As at end-1H2026, cash balances remained relatively modest at RM71.5 million, while cash flow from operations (CFO) stood at RM40.3 million, with CFO interest coverage of 2.69x.