KUCHING: Ta Ann Holdings Bhd’s (Ta Ann) first quarter of 2017 (1Q17) results came above expectations, driven by its plantations division which is also expected to continue supporting the group’s growth going forward.
In its filing to Bursa Malaysia, Ta Ann’s revenue for 1Q17 reached RM305.57 million while its profit before tax and net profit for the quarter increased more than three-folds from RM17.61 million and RM11.96 million in 1Q17 compared with 1Q16.
It attributed its better performance to the increased crude palm oil (CPO) and fresh fruit bunches (FFB) production as well as an increased in sales volume by 35 and 21 per cent, respectively.
It also noted its performance for 1Q17 was driven by higher average selling price for CPO (32 and 43 per cent respectively).
In a report, MIDF Amanah Investment Bank Bhd’s research arm (MIDF Research) deemed Ta Ann’s 1Q17 performance as “stellar”.
“The strong result is caused by stellar performance from the plantation division as 1QFY17 FFB production growth came in stronger than expected at 20 per cent year-on-year (y-o-y) to 148,715 metric tonnes (MT),” it explained.
On the performance of Ta Ann’s timber division, MIDF Research pointed out that the group’s timber business had also recorded improvements.
Ta Ann’s timber division earnings saw a 42 per cent y-o-y increase in profit before tax (PBT) to RM13.5 million due to the 13 per cent y-o-y rise in export logs price to US$249 per cubic metres (m3) which has more than offset the weak plywood price (down five per cent y-o-y to US$433 per m3), the research team added.
In a separate report, the research arm of CIMB Investment Bank Bhd (CIMB Research) said lower export volume was in line with the cut in log export quota by the government from 40 to 30 per cent, effective July 1, 2016.
CIMB Research also pegged a more cautious view on Ta Ann’s plantations division due to the expected higher cost derived from the group’s timber division.
“The group indicated that palm oil revenue would improve due to higher FFB output from new mature areas and forward sales of CPO by the group at favourable prices for the rest of 2017,” it said.
“However, the timber division will continue to be negatively impacted by lower logs production and higher levy charges in the second half of 2017 (2H17).
“It was recently reported in the media that Sarawak will increase the cess payment for hill timber from 80 sen to RM50 per cubic metre starting July 1, 2017.”
All in all, CIMB Research cut its FY18 to FY19F earnings per share (EPS) forecasts by four to five per cent to reflect the higher cess payment for hill timber.
“We estimate that Ta Ann will produce 350,000 m3 of logs in 2018, and 50 per cent of the timber are from hill logs.
“As a result, we project the hike in levy on hill logs could raise the group’s cost of production by approximately RM8 million to RM9 million per annum,” it projected.
CIMB Research continued to favour the group’s young oil palm estates but it maintained a ‘hold’ rating on the group as the improving palm oil prospects are offset by weaker prospects for its timber division.
On the other hand, MIDF Research increased its FY17 core net profit forecast by one per cent to RM115 million while it also raised its FY18 estimates by three per cent to RM126 million.