Tuesday, October 15

Favourable prospects for Ta Ann earnings

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KUCHING: Ta Ann Holdings Bhd’s (Ta Ann) earnings prospects remain favourable supported by its timber division and the strengthening of the US dollar.

Analysts maintained their ‘buy’ recommendations with a target price ranging from RM5.12 per share to RM6.50 per share following better than expected third quarter 2015 (3Q15) financial results announced by the company on Monday.

The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) yesterday said earnings outlook for Ta Ann remains positive as earnings from timber division should sustain on the back of favourable exchange rate.

MIDF Research believed price of export logs is expected to remain stable going forward as Myanmar’s log export ban last year has kept the supply of tropical timber tight.

The research firm also believed that Ta Ann’s timber division will continue to benefit from the higher US dollar against the ringgit, along with resilient export log prices that should mitigate the potential lower earnings from its plantation division.

At the same time, Affin Hwang Investment Bank Bhd (Affin Hwang) in a separate report believed Ta Ann is poised to register an estimate earnings per share (EPS) growth of six to eight per cent in 2016 to 2017.

The research firm believed that the company’s EPS growth will be supported by firm timber product average selling prices (ASPs) coupled with improving plantation earnings given the rising matured areas and increasing fresh fruit bunch (FFB) and crude palm oil (CPO) production.

Following Ta Ann’s better than expected 3Q15 results, Affin Hwang raised its EPS growth projection for 2015 to 2017 of the company higher by 25 per cent to 36 per cent on the assumption of higher log ASP to US$280 to US$290 per cubic metre and lower blended plywood production costs by five to seven per cent to US$400 to US$415 per cubic metre.

Similarly, AmResearch Sdn Bhd (AmResearch) has also raised its earnings estimate for Ta Ann’s FY15 to FY17 by 50 to 67 per cent.

The research firm outlined that the better earnings projection for Ta Ann over the medium term were based on the assumption of better than expected log prices and the weak ringgit which could boost its bottom line.

Going forward, AmResearch believed Ta Ann’s bottom line will be well supported by the fast-growing plantation division and potential growth in log exports.

Meanwhile, Ta Ann told Bursa Malaysia on November 16 that its 3Q15 earnings grew by 55 per cent year-on-year (y-o-y) to RM67.42 million from RM43.61 million in 3Q14.

The company added that its 3Q15 revenue increased by five per cent y-o-y to RM298.91 million from RM284.71 million in 3Q14.

Affin Hwang noted that Ta Ann’s earnings improvement in 3Q15 was partly attributed to higher ASPs for both log and blended plywood by 1.4 per cent respectively and higher FFB and CPO production by 29.1 per cent and 25.4 per cent respectively.

The company’s earnings before interest, tax, depreciation and amortisation (EBITDA) margin in 3Q15 was higher at 38.4 per cent against 27 per cent in 2Q15 due to better margins for timber and palm oil products.

For nine months ended September 2015 (9M15), Ta Ann said net profit gained by 25 per cent y-o-y to RM127.95 million while turnover improved by 4.8 per cent y-o-y to RM777.95 million.