Stock Name: TAANN
Company Name: TA ANN HOLDINGS BHD
Ta Ann Holdings Bhd
(July 28, RM5.60)
Maintain hold at RM5.59 with fair value of RM5.83: We are maintaining a 'hold' on Ta Ann Holdings with a fair value of RM5.83 per share (post one-for-five bonus issue that was completed on June 17, 2011). We continue to peg the stock at a price-earnings ratio (PER) of 15 times its FY11F earnings per share (EPS) of 38.9 sen (adjusted for the bonus issue) on the back of sustaining wood and crude palm oil prices.
The company is on track to meet our expectations, with a 1QFY11 net profit of RM26.6 million (-12% quarter-on-quarter; +233% year-on-year) which accounted for 22% of our FY11F earnings of RM120 million and 19% of consensus' RM141.5 million. Ta Ann is scheduled to release its 2Q results by the end of next month.
Ta Ann is one of the major beneficiaries of the'' reconstruction in Japan following the earthquake and tsunami in March. It exports over 90% of its plywood to Japan.
Japan's housing and construction development have improved. Housing starts in Japan rose 6.4% y-o-y in May (March 2011: -2.4% y-o-y; April 2011: 0.3% y-o-y), against the consensus forecast of +3.3%.
A Reuters poll suggests Japan's economy will grow by 1.1% in the July to September quarter, after contracting for three straight quarters. This will partly be due to the ongoing reconstruction that will be spread out over the next few years.
In May, Japan's legislators passed a fiscal 2011 supplementary budget of US$48.8 billion (RM144 billion) to finance the initial phase of rebuilding, including clearing the overwhelming debris and the building of temporary housing. Legislators recently passed the second supplementary budget of US$25.5 billion. It has been reported that about half of that would go towards recovery, including building temporary housing. All these are seen as stopgap packages.
An initial estimate of at least US$150 billion will be required over the next five years to rebuild the ruined northeastern region. Given the slow pace of the budgetary process and the overwhelming amount of debris still left to be cleared, we expect the reconstruction to only gather meaningful pace at the earliest by end-2011.
Ta Ann is trading at a PER of 14 times FY11 and FY12F EPS. Our target PER of 15 times is still two notches below the stock's five-year average PER of 17 times. Our fair value of RM5.83 per share provides an FY11F return-on-equity of over 13% and gross dividend yield of 2.7% at current price. ' AmResearch, July 28
This article appeared in The Edge Financial Daily, July 29, 2011.
Company Name: TA ANN HOLDINGS BHD
| Research House: AMMB | Price Call: HOLD | Target Price: 5.83 |
Ta Ann Holdings Bhd
(July 28, RM5.60)
Maintain hold at RM5.59 with fair value of RM5.83: We are maintaining a 'hold' on Ta Ann Holdings with a fair value of RM5.83 per share (post one-for-five bonus issue that was completed on June 17, 2011). We continue to peg the stock at a price-earnings ratio (PER) of 15 times its FY11F earnings per share (EPS) of 38.9 sen (adjusted for the bonus issue) on the back of sustaining wood and crude palm oil prices.
The company is on track to meet our expectations, with a 1QFY11 net profit of RM26.6 million (-12% quarter-on-quarter; +233% year-on-year) which accounted for 22% of our FY11F earnings of RM120 million and 19% of consensus' RM141.5 million. Ta Ann is scheduled to release its 2Q results by the end of next month.
Ta Ann is one of the major beneficiaries of the'' reconstruction in Japan following the earthquake and tsunami in March. It exports over 90% of its plywood to Japan.
Japan's housing and construction development have improved. Housing starts in Japan rose 6.4% y-o-y in May (March 2011: -2.4% y-o-y; April 2011: 0.3% y-o-y), against the consensus forecast of +3.3%.
A Reuters poll suggests Japan's economy will grow by 1.1% in the July to September quarter, after contracting for three straight quarters. This will partly be due to the ongoing reconstruction that will be spread out over the next few years.
In May, Japan's legislators passed a fiscal 2011 supplementary budget of US$48.8 billion (RM144 billion) to finance the initial phase of rebuilding, including clearing the overwhelming debris and the building of temporary housing. Legislators recently passed the second supplementary budget of US$25.5 billion. It has been reported that about half of that would go towards recovery, including building temporary housing. All these are seen as stopgap packages.
An initial estimate of at least US$150 billion will be required over the next five years to rebuild the ruined northeastern region. Given the slow pace of the budgetary process and the overwhelming amount of debris still left to be cleared, we expect the reconstruction to only gather meaningful pace at the earliest by end-2011.
Ta Ann is trading at a PER of 14 times FY11 and FY12F EPS. Our target PER of 15 times is still two notches below the stock's five-year average PER of 17 times. Our fair value of RM5.83 per share provides an FY11F return-on-equity of over 13% and gross dividend yield of 2.7% at current price. ' AmResearch, July 28
This article appeared in The Edge Financial Daily, July 29, 2011.
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