Stock Name: TAANN
Company Name: TA ANN HOLDINGS BHD
Research House: RHB
Ta Ann Holdings Bhd
(May 30, RM6.61)
Maintain outperform at RM6.52 with fair value of RM6.52: Ta Ann's 1QFY11 net profit of RM26.6 million came in at 15% to 19% of our full-year forecast and market consensus. This is within our expectations as we anticipate much stronger quarters ahead, underpinned by the surge in log and plywood prices after Japan's earthquake in March as well as increasing fresh fruit bunches (FFB) production volume at its plantation division.
Net profit for 1QFY11 more than tripled to RM26.6 million (from RM8 million a year ago) as a result of higher selling prices for logs (+39%), plywood (+39%), and crude palm oil [CPO] (+44%). FFB production volume was also higher by 36% due to an increase in mature hectarage, but sales volume for logs was down by 31% and plywood 30% due to lower log production volume.
Net profit for 1QFY11 decreased by 11.9% quarter-on-quarter (from RM30.2 million previously) mainly due to lower export log sales (-30%), plywood sales (-11%) and FFB production volume (-19%). The decline in sales volume was partially cushioned by higher selling prices for logs (+10%), plywood (+11%), and CPO (+17%).
The decline in sales volume of its timber division was largely due to the seasonally wet weather conditions that hampered log harvesting.
We are of the view that Ta Ann's prospects continue to be promising on the back of rising FFB production volume for the next few years.
Increasing mature oil palm hectarage will be the main driver for Ta Ann's earnings, contributing more than 60% of earnings for FY11 (from 36% for FY09). We expect earnings from its logging division to remain strong due to robust demand from India (its main export market) and China.
With rising plywood prices after the Japan earthquake in March, its previously loss-making plywood division (due to the high production cost of its Tasmanian operations) will likely be able to turn around in 2011.
Compared to a net loss last year (estimated at about RM15 million to RM20 million), we are now projecting Ta Ann's plywood division will record a net profit of about RM10 million to RM15 million in 2011.
We maintain our forecasts. The risks to our view include: (i) timber and CPO price falling; (ii) a slower-than-expected recovery in Japan's economy; and (iii) bad weather conditions that will hamper log production volume.
Our sum-of-parts-based fair value for Ta Ann is RM8.44 based on unchanged 12 times FY11 timber division earnings and 13 times FY11 plantation division earnings. We maintain our 'outperform' call on the stock. ' RHB Research, May 30
This article appeared in The Edge Financial Daily, May 31, 2011.
Company Name: TA ANN HOLDINGS BHD
Research House: RHB
Ta Ann Holdings Bhd
(May 30, RM6.61)
Maintain outperform at RM6.52 with fair value of RM6.52: Ta Ann's 1QFY11 net profit of RM26.6 million came in at 15% to 19% of our full-year forecast and market consensus. This is within our expectations as we anticipate much stronger quarters ahead, underpinned by the surge in log and plywood prices after Japan's earthquake in March as well as increasing fresh fruit bunches (FFB) production volume at its plantation division.
Net profit for 1QFY11 more than tripled to RM26.6 million (from RM8 million a year ago) as a result of higher selling prices for logs (+39%), plywood (+39%), and crude palm oil [CPO] (+44%). FFB production volume was also higher by 36% due to an increase in mature hectarage, but sales volume for logs was down by 31% and plywood 30% due to lower log production volume.
Net profit for 1QFY11 decreased by 11.9% quarter-on-quarter (from RM30.2 million previously) mainly due to lower export log sales (-30%), plywood sales (-11%) and FFB production volume (-19%). The decline in sales volume was partially cushioned by higher selling prices for logs (+10%), plywood (+11%), and CPO (+17%).
The decline in sales volume of its timber division was largely due to the seasonally wet weather conditions that hampered log harvesting.
We are of the view that Ta Ann's prospects continue to be promising on the back of rising FFB production volume for the next few years.
Increasing mature oil palm hectarage will be the main driver for Ta Ann's earnings, contributing more than 60% of earnings for FY11 (from 36% for FY09). We expect earnings from its logging division to remain strong due to robust demand from India (its main export market) and China.
With rising plywood prices after the Japan earthquake in March, its previously loss-making plywood division (due to the high production cost of its Tasmanian operations) will likely be able to turn around in 2011.
Compared to a net loss last year (estimated at about RM15 million to RM20 million), we are now projecting Ta Ann's plywood division will record a net profit of about RM10 million to RM15 million in 2011.
We maintain our forecasts. The risks to our view include: (i) timber and CPO price falling; (ii) a slower-than-expected recovery in Japan's economy; and (iii) bad weather conditions that will hamper log production volume.
Our sum-of-parts-based fair value for Ta Ann is RM8.44 based on unchanged 12 times FY11 timber division earnings and 13 times FY11 plantation division earnings. We maintain our 'outperform' call on the stock. ' RHB Research, May 30
This article appeared in The Edge Financial Daily, May 31, 2011.
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