Ta Ann Holdings Bhd
(May 27, RM4.33)
Maintain outperform with target price of RM5.53: Ta Ann’s first quarter ended March 31 of financial year 2014 (1QFY14) core earnings of RM29 million accounted for 25% of our and consensus’ forecasts, which came in within our estimates.
The strong set of results was mainly underpinned by the recovery of crude palm oil (CPO) prices and double-digit growth for fresh fruit bunch (FFB) production.
To our surprise, management announced a first interim single-tier dividend of 10 sen, payable on June 27. The dividend is also higher than the full-year dividend paid for the last two years.
We reaffirm our “outperform” call with a slightly lower target price of RM5.53 after fine-tuning our numbers for FY15 and FY16 as we expect slower production growth next year.
Revenue for 1QFY14 grew 2.3% quarter-on-quarter and 41% year-on-year (y-o-y). The stronger y-o-y sales were mainly led by an increase in the plantation segment (39%) and timber segment (43) driven by better timber prices and higher log and plywood sales volumes.
Log exports and plywood sales increased 43% and 16% respectively. Meanwhile, average prices for logs jumped 20% y-o-y to US$ 251 (RM806) per cu m while average plywood prices were up 7% to US$ 530 per cu m.
The better plantation sales were mainly due to an increase in CPO prices which jumped 14% to RM2,499 per tonne compared to RM2,200 per tonne while CPO production jumped nearly 16%. The average price was lower than the market average as the company had sold forward 50% of its CPO production in late 2013, at around RM2,400 to RM2,500 per tonne.
Core earnings for 1QFY14 jumped to RM29 million, with the plantation and timber segments recording strong earnings of RM28 million and RM11 million respectively.
The higher FFB cost of RM390 per tonne for the quarter was due to higher manuring expenses and management expects it to normalise towards the RM300 to RM320 per tonne levels in the coming quarters.
Management is also expecting a 12% to 14% increase in FFB production this year, driven by the additional mature acreage of 2,400ha and young age profile of its plantations. Total mature planted area is expected to reach 33,000ha by year-end. — PublicInvestResearch, May 27
This article first appeared in The Edge Financial Daily, on May 28, 2014.
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