Plantations division the star performer for Ta Ann

KUCHING: Local player Ta Ann Holdings Bhd (Ta Ann) saw its core net income of RM68.9 million for the forst half of 2017 (1H17) coming in within expectations, with its plantations segment labelled as the ‘star performer’ by analysts.

To note, its core net income for 1H17 jumped 54 per cent year on year (y-o-y) as its profit before tax (PBT) for its plantation division surged 279 per cent y-o-y.

MIDF Amanah Investment Bank Bhd (MIDF Research) saw that Ta Ann’s plantation division improved as it benefited from better crude palm oil (CPO) price, which grew by 19 per cent y-o-y to RM2,826 per metric tonne, and higher production of fresh fruit bunch, which grew 14 per cent y-o-y to 323,932 metric tonnes.

“Plantation division is the biggest earnings contributor with PBT of RM98.9 million – making up 86 per cent of the group’s profits,” it highlighted.

“Although Ta Ann’s CNI of RM68.9 million made up 60 and 55 per cent of ours and consensus full year earnings estimate, we are expecting weaker performance from timber segment in 2HFY17,” it added.

“We believe that the reduction in export quota to 20 per cent from 30 previously will affect the timber division from 3QFY17 onwards.”

Another research house, AmInvestment Bank Bhd (AmInvestment Bank) remained positive on Ta Ann’s earnings prospects.

“The quota reduction for export logs from 30 to 20 per cent will be channelled to produce more plywood products -- such as products with higher plantation and certified woods components; and to utilise imported PEFC certified eucalyptus veneer -- which saw an increase of US$25 per cubic metre to date.

“On the other hand, its oil palm plantations will continue to provide a steady income stream.

“We continue to like Ta Ann because plantation earnings are expected to rise on higher production and prices; and expansion of its plantation business through the acquisition of Agrogreen Ventures and progress on two non-Customary right joint venture projects which will add more than 9,000 hectares to its existing plantation estate.

However, the outlook of its timber business will remain unexciting due to state enforcement rules which include the reduction of log export to 20 per cent; certification exercise, including reduction in annual coupe size and cutting diameter to increase with a minimum limit of 45 to 50cm; and increase in cess payment to RM50 per cubic metre for hill timber activities effective July 1, 2017.

Looking ahead, Kenanga Investment Bank Bhd ( Kenanga Research) expect plantation to contribute the bulk of Ta Ann’s 2H17 earnings as production heads into peak season.