MARKET DEVELOPMENT
Ta Ann Shares Advance 10% on Rising CPO Price
Ta Ann Shares Advance 10% on Rising CPO Price
20/02/2017 (The Star) - The share price of Sibu-based timber and plantation group Ta Ann Holdings Bhd has rallied over 10% in the past two months, thanks to the good run-up in crude palm oil (CPO) prices.
Of late, Ta Ann has been on the radar of plantation analysts, given its solid balance sheet and decent dividend yields, apart from the uptrend in CPO prices, which are trading between RM2,800 and RM3,100 per tonne as well as the strong US dollar against the ringgit.
On Friday, Ta Ann’s share price closed up one sen to RM4.13.
Analysts also expect strong CPO prices to be the key growth driver of Ta Ann group’s financial year 2017 (FY17) results, as its timber business would likely remain lacklustre.
“Our sensitivity analysis shows that every RM100 per tonne increase in the CPO price will enhance Ta Ann group’s earnings by about 5%,” said PublicInvest Research (PIVB) in its recent report.
Assuming that the FY17 average CPO price exceeds PIVB’s CPO price estimate of RM2,600 per tonne, Ta Ann is likely to deliver better-than-expected results this year, added the research unit.
For FY17 ending Dec 31, PIVB expects Ta Ann to post an estimated core net profit of RM139.3mil on the back of RM1.07bil in revenue.
This is higher than its forecast FY16 core net profit of RM122.4mil and revenue of RM1.03bil.
PIVB also expects Ta Ann’s timber segment to remain soft, while the plantation segment should deliver strong earnings growth bolstered by strong CPO prices and production growth.
Meanwhile, Ta Ann’s management is expected to allocate about RM90mil to capital expenditure (capex) this year.
Of the total capex, about RM60mil will be for its existing immature oil palm areas and new areas under the Native Customary Rights (NCR) joint-venture partnership, as well as new mechanisation for fruit collection and evacuation due to shortage of foreign labour.
And some RM20mil for plywood and logging plant upgrades and the remaining for new tree plantings, the research unit added.
To recap, Ta Ann group managing director and CEO Datuk Wong Kuo Hea (pic) recently told StarBiz that Ta Ann had no intentions of expanding into Indonesia, hence its oil palm landbank expansion would be in Sarawak.
As there will be no new plantation land (titled state land) to be made available in Sarawak in the near term, all new developments there will be carried out on NCR land through JVs with NCR land owners.
“This explains why out of Ta Ann’s 87,076ha total landbank, almost 70% is said to be NCR land,” said an analyst.
Ta Ann’s average plantation age profile is about eight years, of which 53% is in its prime age of seven to 12 years, 21% young trees of four to six years, 13% old trees of 13-16 years, and 13% immature trees of zero to three years. On the group’s production, Ta Ann’s management is targeting its fresh fruit bunch (FFB) production growth of 10% to 13% this year based on its estimated mature area of 37,000ha and FFB yield of 20 tonnes per ha per year.
“However, a persistent El Nino effect could pose a threat to the FFB production target, which could also see production growth dragged by 3%-4%,” added PIVB.
At the same time, Ta Ann is targeting to maintain its cost of production for both its timber and plantation arms this year.
“It will be looking at an FFB cost of about RM280-RM300 per tonne despite the high fertiliser cost weighed in due to the weaker ringgit. But this will be cushioned by an improvement in the FFB production,” said the research unit.
For timber, log cost is expected to stay around US$120 per cu m, while the plywood cost will range around US$430-US$440 per cu m.
Of late, Ta Ann has been on the radar of plantation analysts, given its solid balance sheet and decent dividend yields, apart from the uptrend in CPO prices, which are trading between RM2,800 and RM3,100 per tonne as well as the strong US dollar against the ringgit.
On Friday, Ta Ann’s share price closed up one sen to RM4.13.
Analysts also expect strong CPO prices to be the key growth driver of Ta Ann group’s financial year 2017 (FY17) results, as its timber business would likely remain lacklustre.
“Our sensitivity analysis shows that every RM100 per tonne increase in the CPO price will enhance Ta Ann group’s earnings by about 5%,” said PublicInvest Research (PIVB) in its recent report.
Assuming that the FY17 average CPO price exceeds PIVB’s CPO price estimate of RM2,600 per tonne, Ta Ann is likely to deliver better-than-expected results this year, added the research unit.
For FY17 ending Dec 31, PIVB expects Ta Ann to post an estimated core net profit of RM139.3mil on the back of RM1.07bil in revenue.
This is higher than its forecast FY16 core net profit of RM122.4mil and revenue of RM1.03bil.
PIVB also expects Ta Ann’s timber segment to remain soft, while the plantation segment should deliver strong earnings growth bolstered by strong CPO prices and production growth.
Meanwhile, Ta Ann’s management is expected to allocate about RM90mil to capital expenditure (capex) this year.
Of the total capex, about RM60mil will be for its existing immature oil palm areas and new areas under the Native Customary Rights (NCR) joint-venture partnership, as well as new mechanisation for fruit collection and evacuation due to shortage of foreign labour.
And some RM20mil for plywood and logging plant upgrades and the remaining for new tree plantings, the research unit added.
To recap, Ta Ann group managing director and CEO Datuk Wong Kuo Hea (pic) recently told StarBiz that Ta Ann had no intentions of expanding into Indonesia, hence its oil palm landbank expansion would be in Sarawak.
As there will be no new plantation land (titled state land) to be made available in Sarawak in the near term, all new developments there will be carried out on NCR land through JVs with NCR land owners.
“This explains why out of Ta Ann’s 87,076ha total landbank, almost 70% is said to be NCR land,” said an analyst.
Ta Ann’s average plantation age profile is about eight years, of which 53% is in its prime age of seven to 12 years, 21% young trees of four to six years, 13% old trees of 13-16 years, and 13% immature trees of zero to three years. On the group’s production, Ta Ann’s management is targeting its fresh fruit bunch (FFB) production growth of 10% to 13% this year based on its estimated mature area of 37,000ha and FFB yield of 20 tonnes per ha per year.
“However, a persistent El Nino effect could pose a threat to the FFB production target, which could also see production growth dragged by 3%-4%,” added PIVB.
At the same time, Ta Ann is targeting to maintain its cost of production for both its timber and plantation arms this year.
“It will be looking at an FFB cost of about RM280-RM300 per tonne despite the high fertiliser cost weighed in due to the weaker ringgit. But this will be cushioned by an improvement in the FFB production,” said the research unit.
For timber, log cost is expected to stay around US$120 per cu m, while the plywood cost will range around US$430-US$440 per cu m.