Analysts expect Ta Ann’s coming results to meet expectations

KUCHING: Researchers with MIDF Amanah Investment Bank Bhd ( MIDF Research) believe Sarawakian player Ta Ann Holdings Bhd (Ta Ann) will see its earnings for the frist half of 2016 (1H16) meeting consensus estimates, predicting its coming second quarter (2Q16) core earnings to be between RM30 million to RM35 million.

The firm in a note yesterday said together with 1QFY16 core earnings of RM17 million, it is expecting 1HFY16 core earnings to be in the range of RM47 million to RM52 million.

“Effectively, Ta Ann’s 1HFY16 core earnings should reach 39 to 43 per cent of consensus FY16 estimates of RM120 million,” it calculated.

Chief executive officer/ managing director Sadacharamani Govindasamy said the project would be the impetus for industries such as ceramic and fertiliser bottling plants in India.

“It is going to drive a bigger range of industries in India,” he told a press conference here yesterday.

He said the first phase of the construction kicked off last week and it was expected to be completed in 16 months.

The construction would include the building of a modular five million tonne per annum capacity regasification and floating storage plantandrelatedancillaryfacilities in the vicinity of Krishnapatnam Port.

Sadacharamani said the first phase was expected to generate an annual revenue of US$ 50 million.

Costruction of the second phase, which would involve the setting up of five regastification units of the same capacity, would begin next year.

Speaking to Bernama later, Sadacharamani said:” We have enough requirement from the Indian government for the construction of the urea plants, which is not covered in the first phase.

“If the construction of the first phase runs smoothly, construction of the second phase can probably start anytime next year.

Isomeric inked an agreement, in January 2016, with Andhra Pradesh- based LEPL Renergy Pvt Ltd for the regasification and floating storage terminal project.

Under the agreement, Isomeric will invest about RM1.55 billion in the project, which will be developed by a special purpose vehicle (SPV), Petrogas Pvt Ltd, in partnership with a Malaysian consortium (74 per cent) and LEPL Renergy (26 per cent). — Bernama

“This is in line with historical trend seen in the past five years in which the first half core earnings made up, on average, 37 per cent of full year core earnings.

MIDF Research believed Ta Ann’s plantation division should see an improvement in earnings on a quarterly comparision, driven by higher fresh fruit bunch (FFB)production.

“Likewise, earnings should also improve year on year (yo-y) on higher FFB production and better crude palm oil prices, based on date from the Malaysian Palm Oil Board,” it added.

Meanwhile, Affin Hwang Investment Bank Bhd (AffinHwang Capital) expected Ta Ann’s 2Q16 earnings from the timber division to likely be lower y-o-y due to weaker timber product prices but said this should be offset by the plantation division.

“We estimate Ta Ann’s 2Q16 net profit would likely be at RM30 million to RM35 million. We believe contribution from the timber division will likely be lower y-o-y but should be offset by higher contribution from the plantation division,” it said in a separate note.

It further highlighted cautious buying on timber products as the Indian buyers are still cautious on their log purchases as they try to source lower-cost logs due to the depreciation of the Indian rupee against the US dollar.

“Similarly, Japan’s demand for plywood remains soft and we believe that there will not be any rush orders for plywood due to the change in plans to increase the consumption tax hike to 2019,” it added. “We maintain our average log and plywood price assumptions for Ta Ann at US$225 to US$230 per cubic metre and US$470 to US$480 per cubic metre respectively for 2016 to 2018 estimates.

This led AffinHwang Capital ti maintain our its buy rating on Ta Ann with a target price of RM4.42. MIDF Research meanwhile maintained its neutral call for Ta Ann at a target price of RM3.50.

“We maintain our neutral call on Ta Ann as the envisaged higher earnings from plantation division is expected to be offset by lower earnings from timber division.”