We maintain BUY on Ta Ann Holdings Bhd, with an unchanged fair
value of RM7.60/share, based on a PE of 13x pegged to FY12F EPS of 58.5 sen.
Ta Ann’s FY11 net profit of RM153mil (+104%) was within expectations,
but for an impairment of RM9.7mil relating to its Tasmania veneer manufacturing
operations.
Excluding the impairment, core net profit amounted to RM163mil vs. our estimate of RM162mil and
consensus’ RM159mil.
It declared a second interim (single-tier) dividend of 10 sen/share,
bringing the total for the full year to 20 sen/share. (vs. 8 sen in FY10) – representing a net
payout ratio of 40% and beating our forecast of a 15 sen/share estimate.
We have accordingly adjusted upwards our forecast annual gross
dividend to 20 sen/share from 15/share previously – representing a net payout
of between 20% and 27%.
We understand that the RM9.7mil impairment was made with regard
to its property, plant and equipment in Tasmania, given the continuing losses
of the operations there.
Including the impairment, the plywood division incurred a
loss after tax of RM14mil (halved vs. loss of RM28.8mil in FY10). We deem the
impairment as prudent given the continuing losses – short of closing down the
loss-making unit. We do not rule out more impairment to come.
Notwithstanding that, we are maintaining our forecasts as we
had already assumed an FY11 pre-tax loss of RM5mil (excluding impairment) for
the plywood division, and further annual losses of between RM10mil and RM13mil
for FY12FFY14F.
FY11 bottomline was driven by a significant growth in its
oil palm division, which posted an 87% rise in profit after tax to RM124mil
(vs. FY10’s RM66mil), as well as the logging division, which posted a 26% YoY
rise in PAT to RM44mil.
Notably, fresh fruit production (FFB) sales volume rose
nearly 50% 457,975 tonnes from 310,870 tonnes in FY10, while average CPO price
rose 23% to RM3,306/tonne from RM2,691/tonne in FY10.
We continue to like Ta Ann for its rapidly growing oil palm division.
Additionally, log and plywood prices are currently holding above US$210/cu m
and above US$600/cu m, respectively.
Source: AmeSecurities
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