Earnings visibility continue for Ta Ann on plantations
KUCHING: Analysts continue to see earnings visibility for local timber and palm oil player Ta Ann Holdings Bhd (TA Ann) as plantations continue to provide reprieve, in spite of a slowdown in timber.
This comes as it announced results for the first nine months of financial year 2017 (9MFY17) results came in within expectations at 75 and 74 of AmInvestment Bank Bhd’s (AmInvestment Bank) full- year forecast and full- year consensus estimates respectively.
The research house said Ta Ann’s 9MFY17 net profit increased marginally by two per cent year on year ( y- o- y) largely due to improved average selling prices (ASP) for both crude palm oil (CPO) and palm kernel and sales volume growth of 10 and 17 per cents respectively.
These were partially offset by a weaker performance from the timber division largely due to the decline of sales volume of export log and plywood products.
“The reduction in export log quota (from 30 to 20 per cent) and Sarawak’s certification exercise effective July 1, 2017 has caused the significant drop for export log sales volume for the period.
“The company expects demand for its plywood products to pick up in the near term with the rollout of Olympic infrastructure construction works in Japan,” it said in an analyst report yesterday.
“On the other hand, its oil palm plantations will continue to provide a steady income stream and will become the main profit contributor in coming quarters.”
On a segmental comparison, researchers with MIDF Amanah Investment Bank Bhd ( MIDF Research) saw that Ta Ann’s plantation division profit before tax (PBT) improved 99 per cent y-o-y to RM153.4 million as it benefited from better CPO price and higher fresh fruit bunch production.
“Plantation division is the biggest earnings contributor with PBT of RM153.4 million,” it added.
“Meanwhile, timber division earnings declined 81 per cent y-o-y, but its contribution is small.
“Timber division PBT was down 81 per cent y-o-y to RM11.2 million and the timber division registered loss before tax of RM5.3 million in 3QFY17.
“We gather that this is caused by the delay in shipment of the products in the plywood division. Hence, we expect things to normalize in 4QFY17 and the division should remain return to a profitable position. PBT contribution from timber division remains small at RM11.2 million.”
MIDF Research liked the stock as Ta Ann’s plantation division earnings growth should remain strong due to high FFB growth expected at 10 per cent; and its timber division outlook is challenging but remains profitable.
The same can be said by AmInvestment Bank who predicted Ta Ann’s plantation earnings 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.