Wednesday, November 30

Analysts expects strong catch up for Ta Ann

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Ta Ann’s PBT and normalised earnings for its 1Q22 rose to RM114.8 million and RM74.4 million respectively.

KUCHING (May 24): Ta Ann Holdings Bhd (Ta Ann) recorded a top-line of RM487.7 million in its first quarter of 2022 (1Q22), mainly driven by remarkable oil palms and timber products performance as the company managed to achieved higher average selling prices (ASPs) for crude palm oil (CPO), fresh fruit bunch (FFB) and plywood product.

Thanks to higher ASP recognised and improving demand, researchers at MIDF Amanah Investment Bank Bhd (MIDF Research) saw that Ta Ann’s profit before tax (PBT) and normalised earnings rose to RM114.8 million and RM74.4 million respectively.

“Its oil palm contribution remains solid in 1Q22 with revenue growing 43.7 per cent year on year (y-o-y) to RM389.5 million on higher ASP of CPO and FFB realised,” it said.

“As a result, PBT also showed a strong gain amounted RM92.4 million, an increase of 115.3 per cent y-o-y despite lower sales volume registered due to low crop season during the quarter.”

MIDF Research noted that Ta Ann’s timber segment revenue surged 41.4 per cent y-o-y to RM98.2 million due to strong demand for plywood product on improved economic activities.

“We reckon the contribution from this segment to continue promising, on the back of economic recovery in most countries,” it added.

“We maintain our FY22-FY23 revenue and earnings estimates of at this juncture, under review for imminent upgrade (pending revision to our target average CPO prices for the current and forward years).

“We reckon its plantation segment to continue to reap higher CPO production in-line with seasonal months as well as benefit from strong CPO price. We believe demand for PO to remain on the upside due to uncertainties of tight supply of substitutes oil situation, over Russia-Ukraine prolonged war.”

Meanwhile, Kenanga Investment Bank Bhd’s research arm (Kenanga Research) said the seasonal pick-up in palm and soyabean productions in the second half of the year should provide much needed relief to a tight edible oils market but will also add pressure for palm oil prices to trend lower.

“However, CPO price downside should be limited due to a tight international edible oils and fats market which is likely to see improvements only in 2023; China’s demand is expected to grow as its economy gradually normalises; and current high energy prices are supportive of vegetable oil prices as biofuel demand will rise if vegetable oil prices fall sufficiently.”

Kenanga Research estimated that CPO prices for Ta Ann should average RM4,500 per metric tonne (MT) for FY22 (up from RM4,200 per MT previously) and RM4,000 per MT for FY23 compared to its old estimate of RM3,500 per MT.

“The demand for timber is also firming up thanks to the ongoing economies reopening with resumption of construction and infrastructure works. At the same time, log supply has also tightened following Russia’s exports ban of logs.

“Subsequently, US, EU and Japan have imposed trade sanctions on Russia due to the Ukraine conflict which started in late February. For Ta Ann, Japanese demand for its plywood should improve further along with demand for logs.

“Although we are optimistic of the timber market, the bulk of the group’s earnings is derived from palm oil. As such we are maintaining our market perform rating and target price of RM6 for Ta Ann.”