KUCHING: Analysts are long-term positive on Ta Ann Holdings Bhd’s (Ta Ann) latest contract to develop two parcels of native customary rights (NCR) land in Kanowit and Kapit.
To note, its subsidiary Ta Ann Plantation Sdn Bhd has entered into two joint ventures with Pelita Holdings Sdn Bhd (Pelita) to develop two parcels of NCR land in Kanowit and Kapit of 17,000 hectares (ha) and 11,200ha, respectively.
Ta Ann will hold a 60 per cent stake in this joint venture while the remainder will be held by Pelita (30 per cent as a trustee of NCR owners and 10 per cent directly owned by Pelita).
Kenanga Invesment Bank Bhd (Kenanga Research) gathered that 16,900ha or 60 per cent of the total acerage has been deemed as plantable area.
“We are long-term positive on the joint venture which further expands Ta Ann’s landbank by 29 per cent to 126,200ha.
“Note that we expect its plantation division to contribute 82 per cent of FY15E earnings before interest and tax of RM156.8 million,” it said in a note on the group yesterday.
“Based on the eventual total capital of RM84.5 million, we think that the valuation of the land at RM5,000 per ha favours Ta Ann as it matches the valuation of their previous transaction with Pelita in October 2012.
“We also like the financing terms as the progressive payments will be met with ‘income streams’ via the progress participation as planted area matures. On this basis, assuming a planting rate of 2,000ha a year at a cost of RM30,000 per ha, we expect additional planting cost of RM60 million a year.”
RHB Research Institute Sdn Bhd (RHB Research) noted that these projects are replacement projects for the joint ventures that Ta Ann entered into with Pelita Holdings in 2012, which were subsequently cancelled.
“Based on this price, Ta Ann is paying approximately RM4,995 per plantable ha for this greenfield land, which is a reasonable price to pay, in our view, in line with other NCR land transactions.
“However, we would not put too much hope on the ventures at this juncture, given the relatively high failure rate of NCR land development projects in Sarawak,” it forewarned.
Meanwhile, the research team at Maybank Investment Bank Bhd (Maybank IB Research) kept its earnings forecasts for Ta Ann unchanged as no capital expenditure was incurred and it has yet to factor in the previous joint ventures.
“However, these new joint ventures would affect its future planting plans. Ta Ann’s plantable area of about 44,000ha — excluding the joint ventures – would be fully planted in 2015.
“Under the 2012 agreements, planting was to start in 2016. However, the new planting under the new joint ventures can only start in 2018.
“Nevertheless, we believe Ta Ann will continue to scout for more landbank for future planting.”
Meanwhile, Maybank IB Research said its young average tree age profile of seven years would continue to support a strong fresh fruit bunch output growth at 18 per cent of its three-year forward cumulative annual growth rate.